INTM602000 - Transfer of assets abroad: Non-domiciled individuals: The income charge - the position between 6 April 2005 and 5 April 2008

Following the Tax Law Rewrite, new and separate charging provisions were introduced for all types of foreign income, replacing the general charge under what was Cases IV or V of Schedule D. The new provisions, included in the Income Tax (Trading and Other Income) Act 2005 (ITTOIA), also provided, on a claim, an alternative basis for calculating certain income categorised as ‘relevant foreign income’ and the amount on which an individual would be taxed.

From the introduction of ITTOIA, non-UK domicile status could impact this relevant foreign income and, broadly speaking, resulted in the income subject to the claim being taxed only when received in the UK.

Apart from minor adjustments consequential upon the introduction of ITTOIA, the transfer of assets provisions giving exclusion from charge for certain income of non-UK domiciled individuals remained largely unchanged.

The introduction of ITTOIA was not intended to change the law under transfer of assets in this way and, as a result, the income charge provisions continue to be operated in this interim period in the same way that they were operated prior to April 2005.

When the transfer of assets provisions were themselves rewritten into the Income Tax Act 2007, the post-April 2005 position was maintained through two sections (ITA07/S726 and S730), one for each of two possible income charges.

The new provisions enabled otherwise chargeable income to be excluded if two conditions are met.

Condition A is that the individual is domiciled outside the UK.

Condition B is that if the income had in fact been the individual’s income the individual would not have been chargeable to income tax in respect of it because of domicile status alone.

The approach that will therefore be taken in this period will generally be that described in Examples 1 and 2 at INTM601980.