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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Remittance Basis up to 6 April 2008: Mixed Funds: Remittances from a mixed fund - Example 1

Martyn has lived in the UK for many years. He has paid UK tax on the remittance basis for all relevant tax years and has decided that he will do so again for 2005-2006.

Martyn opens a new account in the British Virgin Islands (BVI) in October 2005 and has his UK salary paid into this account. He also has a salary for overseas employment and his net salary for that work of £5,000 a month is also paid into the BVI account. Dividends from a shareholding in a foreign company are also paid into the account.

BVI Account

  Credit Debit Balance  
Tax Year 2005-2006        
  Balance b/f   £57,000 £47,000
31 Dec UK salary (net of tax) £10,000 £62,000 £57,000
31 Dec Overseas salary (net of tax) £5,000 £57,000 £62,000
3 Jan Transfer to UK account   £67,000 £57,000
31 Jan UK salary £10,000 £72,000 £67,000
31 Jan Overseas salary £5,000 £60,000 £72,000
3 Feb Transfer to UK account   £62,000 £60,000
15 Feb Dividend £2,000 £72,000 £62,000
29 Feb UK salary £10,000 £77,000 £72,000
29 Feb Overseas  salary £5,000 £69,000 £77,000
3 March Transfer to UK account   £79,000 £69,000
31 March UK salary £10,000 £84,000 £79,000
31 March Overseas salary £5,000 £74,000 £84,000
3 Apr Transfer to UK account     £74,000

The balance brought forward of £47,000 is made up of £15,000 UK salary, £25,000 overseas salary and £7,000 overseas dividends all arising in, and credited to the account during that tax year. Martyn has paid the relevant amount of UK tax based upon his UK sources of income.

To establish the taxable amount of remittances made in the example above in 2005-2006 the account must be analysed. In this case the analysis is straightforward. Martyn has brought £35,000 to the UK between December 2005 and March 2006 to meet his day to day UK spending needs.

Applying the Sterling Trust v CIR practice outlined above, this can be regarded as remittances consisting solely of his UK salary that has already been taxed under PAYE. Because he has claimed the remittance basis of taxation in respect of his relevant foreign income or foreign earnings for 2005-2006 he has no further amount of UK tax to pay on the amounts that stay in the BVI account.