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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

From
HM Revenue & Customs
Updated
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Remittance Basis: Remittance Basis up to 6 April 2008: Occasions when there may not be a remittance: Offshore Loans

Individuals who borrowed money from a non-UK institution were able to repay the interest on that loan out of untaxed relevant foreign income without giving rise to a tax charge on the remittance basis even if the borrowed money was used in the UK.

Example

Jack, a remittance basis user, has never lived in the UK before but he moves to the UK in 2003/04 to work and borrows £500,000 from a bank in the Isle of Man that he uses to buy a flat in London. Jack is employed in London but he has money that is ‘relevant foreign income’ which is regularly paid into an offshore bank account that is sufficient to pay the interest on the loan. He arranges for the interest on the loan to be paid to the lender directly from his Isle of Man bank account.

Repayment of the original amount of capital that was borrowed using relevant foreign income.