In August changes took effect around how money brought into the UK or used in the UK under a loan facility secured by foreign income or gains is treated.
A taxpayer who is resident but not domiciled in the UK can elect to pay tax on the remittance basis, ie he is taxed in the UK on remittances of income or gains from abroad into the UK. Under the rules in the Income Tax Act 2007, there is a remittance if:
A remittance payer who has obtained a loan secured on foreign income, or gains that remain abroad, and sends this to the UK, is considered to have remitted this to the extent of the amount sent to the UK. Nothing has changed in this respect; HMRC has always considered this to be the case.
If the remittance was made to repay the loan from a different source of income or gains, that would result in a second remittance to the UK. In 2010, HMRC issued a concession that applied to loans on a commercial basis that were regularly serviced from foreign income or gains. In such circumstances, the loan repayments would be treated as remittances and not the use of the underlying collateral.
This concession is withdrawn from 4 August 2014; from that date, money brought into the UK or used in the UK under a loan facility secured by foreign income or gains will be treated as a taxable remittance of that amount of foreign income or gains. If the loan is serviced from or repaid from other foreign income or gains, the repayments of income or capital will constitute remittances in the normal way.
Pre-existing arrangements will be honoured provided the loan arrangements were within the concession and:
Notifications should be sent to:
HM Revenue and Customs PTI Risk Team SO708
PO Box 203
Bootle L69 9AP