Remittance Basis: Remittance Basis up to 6 April 2008: Mixed Funds: Remittances from a mixed fund - Example 2
Cleo has lived in the UK for many years. She has paid UK tax on the remittance basis for all relevant tax years and has decided that she will do so again for 2006-2007.
Cleo has an overseas employment and her net salary for that work of £10,000 a month is paid into an account in the Channel Islands. Dividends from shareholdings in a number of foreign companies are also paid into the Channel Islands account.
Channel Islands Account
|Tax Year 2006-2007|
|31 Dec||Overseas salary (no foreign tax paid)||£10,000||£57,000|
|3 Jan||Transfer to UK account||£5,000||£57,000|
|31 Jan||Overseas salary||£10,000||£67,000|
|3 Feb||Transfer to UK account||£12,000||£60,000|
|29 Feb||Overseas salary||£10,000||£72,000|
|3 March||Transfer to UK account||£8,000||£69,000|
|31 March||Overseas salary||£10,000||£79,000|
|3 Apr||Transfer to UK account||£10,000||£74,000||2|
Note 1: The balance brought forward of £47,000 is made up of £40,000 overseas salary and £7,000 overseas dividends all arising in, and credited to the account during that tax year.
To establish the taxable amount of remittances made in the example above in 2006-2007 the account must be analysed. In this example the account contains a mixture of income, capital and gains. Using the principles described above in Scottish Provident v Allan (4 TC 409/591) the account (a mixed fund) contains sufficient amounts of untaxed income to match against the remittances. Cleo has made a taxable remittance of her foreign income of £35,000.
Note 2: If the foreign income had suffered overseas withholding tax, the terms of any relevant double taxation treaty must be taken into account. Refer to the International Manual INTM160000+ for details.