RFIG45100 - FIG regime: Qualifying foreign income

Section 845H ITTOIA 2005

Individuals who are ‘qualifying new residents’ (see RFIG44000) will not be able to claim relief under the FIG regime for all types of foreign income, only ‘qualifying foreign income’. The types of income that are qualifying foreign income are set out below, and are broadly similar to the types of income that could be taxed on the remittance basis, but there are some differences.

Income is qualifying foreign income if it falls within a description set out at section 845H ITTOIA 2005, and is not ‘disqualified income’, as described at section 845I ITTOIA 2005 – see RFIG45200.

Qualifying foreign income for the purposes of the FIG regime can only be income which arises on or after 6 April 2025. This is because when an individual makes a foreign income claim for a tax year, they are only entitled to relief in respect of income for that tax year, and a foreign income claim cannot be made for a tax year before 2025-26. This means that former remittance basis users who return to the UK after 10 consecutive tax years of non-UK residence and are eligible for the FIG regime cannot claim relief for any foreign income and gains that accrued prior to 6 April 2025 when they were UK resident and using the remittance basis – see example 3 at RFIG44000. (See also RFIG45500 for the definition of qualifying foreign gains).

The types of foreign income described at section 845H are:

  • profits of a trade carried on wholly outside the UK – see Chapter 2 of Part 2 ITTOIA 2005 and BIM14000
  • a UK resident partner’s share of the profits of a trade carried on by the firm wholly outside the UK
  • profits of an overseas property business – see PIM1025 – also see RFIG43000 for the loss of relief in respect of costs of dwelling-related loans
  • adjustment income in respect of a trade carried on wholly outside the UK – see Chapter 17 of Part 2 ITTOIA and BIM34095
  • interest, such as interest paid on a foreign bank account – see Chapter 2 of Part 4 ITTOIA 2005
  • dividends from non-UK resident companies – see Chapter 4 of Part 4 ITTOIA 2005
  • purchased life annuity payments – see Chapter 7 of Part 4 ITTOIA 2005 and IPTM4100
  • profits from deeply discounted securities – see Chapter 8 of Part 4 ITTOIA 2005 and SAIM3010
  • royalties and other income from intellectual property – see section 579 ITTOIA 2005
  • profits from a business which involves films or sound recordings, classed as a ‘non-trading business’ – see Chapter 3 of Part 5 ITTOIA 2005 and BIM56025
  • income from certain telecommunication rights, classed as ‘non-trading income’ – see Chapter 4 of Part 5 ITTOIA 2005
  • certain income arising under the settlements legislation – see RFIG45300
  • estate income – see section 649 ITTOIA 2005 and TSEM7453
  • annual payments not otherwise charged – see Chapter 7 of Part 5 ITTOIA 2005 and SAIM8010
  • income not otherwise charged – see Chapter 8 of Part 5 ITTOIA 2005
  • accrued income profits made by an individual as a result of a transfer of securities if income from the securities would be qualifying foreign income – see Part 12 ITA 2007 and SAIM4000 – see RFIG45200 for income from securities that is disqualified income
  • offshore income gains – see regulation 17 of the Offshore Funds (Tax) Regulations 2009 and IFM13412
  • foreign deemed income treated as arising to an individual under the transfer of assets abroad (ToAA) provisions – see RFIG45400
  • foreign pension income – see Part 9 ITEPA 2003 and EIM75500 – except for the types of pension income that are disqualified income (see RFIG45200)
  • foreign social security benefits – see section 678 ITEPA 2003 and EIM76009
  • the foreign proportion of income arising as a result of the payment of interest, or the making of a distribution or qualified distribution by a qualifying asset holding company (QAHC) – see Schedule 2 to FA 2022 and IFM40110 

Relevant foreign earnings and foreign specific employment income are not qualifying foreign income for the purposes of the foreign income claim, however, relief for these sources of foreign employment income may be available under an OWR election – see EIM43550.

See RFIG42100 and RFIG43000 for making a claim to relieve qualifying foreign income and the effects, including the amount of relief that an individual is entitled to and the impact on an individual’s allowances etc.