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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 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

  Credit Debit Balance Note  
Tax Year 2006-2007          
  Balance b/f     £47,000 1
31 Dec Overseas salary (no foreign tax paid) £10,000   £57,000  
31 Dec Dividend £5,000   £62,000  
3 Jan Transfer to UK account   £5,000 £57,000  
31 Jan Overseas salary £10,000   £67,000  
31 Jan Dividend £5,000   £72,000  
3 Feb Transfer to UK account   £12,000 £60,000  
15 Feb Dividend £2,000   £62,000  
29 Feb Overseas salary £10,000   £72,000  
29 Feb Interest £5,000   £77,000  
3 March Transfer to UK account   £8,000 £69,000  
31 March Overseas salary £10,000   £79,000  
31 March Dividend £5,000   £84,000  
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.