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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: Joint accounts - example

James and Angela have been married for several years, and currently live in the UK. James is domiciled within the UK. Angela is not domiciled in the UK. Angela decides to claim the remittance basis for this year.

Both Angela and James have employment income that is credited to the account. For most of the year Angela works in the UK but she also has a separate part-time employment with a foreign employer outside of the UK for part of the year.

Angela and James have a joint bank account in the Isle of Man. Into this account is paid both of their salaries and some bank interest. They use the account to pay their household bills and state that they each take equal responsibility for doing so, including the mortgage on their jointly owned UK home. The amounts credited to the account are as follows:

Date   Credit Debit Balance
  Opening Balance     £0
30 April UK salary (Angela) £5,000   £5,000
30 April UK salary (James) £2,000   £7,000
30 April Overseas salary (not subject to foreign tax) (Angela) £2,000   £9,000
30 April Bank interest not taxed £400   £9,400
1 May Direct debit - UK energy coy   (£200) £9,200
5 May Cash withdrawal (UK)   (£1,000) £8,200
10 May Cash withdrawal (UK)   (£1,000) £7,200
17 May Direct debit - mortgage   (£3,000) £4,200

The credits and the debits account can be analysed between Angela and James with the following results:

    Angela James Overall
Account Balance                  
      Credit Debit Balance Credit Debit Balance  
  30 Apr UK salary              
Note 1 £5,000   £5,000        
  30 Apr UK salary          
Note 1       £2,000   £2,000 £5,000    
  30 Apr Overseas salary £2,000   £7,000       £7,000
  30 Apr Bank interest              
Note 2 £200   £7,200 £200   £2,200 £9,000    
  1 May DD - UK energy coy   £100 £7,100   £100 £2,100 £9,400
  5 May Cash w/drawn              


Note 3   £1,000 £6,100       £9,200
  10 May Cash w/drawn          


Note 3         £1,000 £1,100 £8,200    
  17 May Direct debit – mortgage Note 4         £1,100 £nil £7,200

Note 1: Earned income is attributed to the employee only and can be treated (Sterling Trust v CIR 12 TC 868) as having been brought to the UK first.

Note 2: Because this is a joint account, the interest arising on it is split equally between Angela and James.

Note 3: This money is withdrawn in the UK by Angela and James to meet their own personal expenditure, for example travel, meals and so on.

In this example James’ ‘personal expenditure’ can be attributed to his ‘income’ credits into the account. If instead the withdrawals by James were regarded as coming from Angela’s ‘portion’ of the pot, money has been brought into the UK there might still be a taxable remittance, with the tax due payable by Angela (see below).

Note 4: The mortgage payment is made to a UK bank. The mortgage is held on James and Angela’s UK home and is a joint debt of Angela and James, and each contributes half of the cost. To the extent that James has money in the account it can be accepted that he has used his taxed income to pay his share of the mortgage.

In this example Angela has remitted £3,000 in the period. As explained at Note 1, following the principle established in the Sterling Trust case, her taxed UK salary of £5,000 is deemed to be available to be remitted first. The result of this analysis is that Angela has remitted none of her foreign income.