RDRM31060 - Remittance Basis: Introduction to the Remittance Basis: Overview of the Remittance Basis regime: Glossary - Key definitions
Important Note on Interpretation
This glossary is intended to be used as a compilation of practical working descriptions of the terms contained in it, for those who may not be familiar with them.
It is not a list of legal definitions used by HMRC or in the legislation.
The descriptions have been drawn from a range of media, and alternative, although similar, descriptions may exist. No legal reliance may be placed on this list.
Glossary of key definitions
| Term | Definition |
|---|---|
| Arising Basis | The normal, or default, basis of UK taxation for UK residents. It means that UK income and capital gains tax is due on all worldwide income and gains as they arise or accrue. |
| Business Investment Relief | An investment made by a relevant person using their foreign income or gains (or something derived from them) in a qualifying company from 6 April 2012. See RDRM34300 onwards |
| Connected Operation | An operation which is effected with reference to a qualifying disposition RDRM33440, or with a view to enabling or facilitating a qualifying disposition. |
| Domicile | A general law concept that connects an individual to a system of personal law in the territory in which they have their ‘permanent home’. For adults this is normally the territory in which they intend to live permanently or indefinitely. Refer to RDR1 for further details.\nDomicile is distinct from nationality and residence. |
| Domicile (deemed) | An individual who meets either Condition A or Condition B of the deemed domicile provisions, and so will be taxable on the arising basis on their worldwide income. |
| Exempt Property | Exempt property includes, among other things: clothing, footwear, jewellery and watches purchased out of relevant foreign income (not gains) that is brought to the UK for personal use.\nAny property that is brought to the UK temporarily, for repair or has a notional value of less than £1,000. |
| Foreign Chargeable Gains | Chargeable gains accruing from the disposal of an asset which is situated outside the United Kingdom. |
| Foreign Income | Income arising from outside the UK, e.g. foreign employment income, foreign pensions. |
| Foreign Securities Income | This concept applies to remittance basis users only, in respect of employment-related securities income. Foreign securities income (‘FSI’) is the amount of employment-related securities income that is foreign.\nAs with earnings from foreign employment, the definition is slightly different for employees who are NOR and employees who are ND. |
| Foreign Specific Employment Income | This term is used in the remittance basis rules to refer to any part of an individual’s employment income of a tax year that is foreign securities income. From 6 April 2011 this includes ‘Taxable Specific Income’ when that is employment income provided through third parties. |
| Gift Recipient | A person, other than a relevant person, to whom the individual makes a gift of money or other property that is income or chargeable gains of the individual, or derives from income or chargeable gains of the individual. |
| Insufficient Nomination | This term is not within the legislation, but has been coined by HMRC to describe the situation when an individual who is claiming the remittance basis, and is liable to pay the remittance basis charge has not nominated enough of their foreign income or gains on their SA return to produce either the £30,000 or the £60,000 charge. The remittance rules provide an ‘automatic’ additional nomination of income to ensure the charge stays at either £30,000 or £60,000. |
| Long Term UK Resident | An individual who is resident in the UK in the current tax year and was also resident in at least seven of the immediately preceding nine tax years. |
| Mixed Fund | An offshore asset that is, represents, derives from or contains more than one type of income or capital, and/or income and capital from more than one tax year.\nSpecial rules apply to determine the nature of remittances where there is a remittance of the whole or part of a mixed fund, or of any property derived from the mixed fund. |
| Nominated Income and Gains | The foreign income or gains of a tax year that a long-term resident remittance basis user ’nominates’ and on which they will pay the income tax or capital gains tax that will constitute the remittance basis charge for that tax year. These must be reported on their Self Assessment tax return for that year. |
| Ordinarily Resident | Someone who is resident in the UK year after year will usually be ordinarily resident here. The concept of ordinarily resident no longer exists after the introduction of the Statutory Residence Test (SRT), from 6 April 2013 (see RDRM11000 onwards)\nRefer to HMRC6 for earlier years. |
| Qualifying Disposition | The disposal of money or other property that is, or derives from, income or chargeable gains of the individual, to someone else in circumstances where property of that other person is somehow enjoyed by a relevant person or used to provide a service in the UK. The term is used in relation to a connected operation. |
| Relevant Debt | An offshore debt relating to property in the UK or the provision of a service in the UK, serviced from foreign income and/or gains. |
| Relevant Person | A relevant person is:\n- The individual him or herself.\n- The individual’s spouse or civil partner, or a couple living together as if they are spouse/civil partners.\n- The individual’s children or grandchildren under 18 years of age. This includes grand/children of their spouse/civil partners.\n- Trustees of a settlement, if the individual or another relevant person is a beneficiary of the trust.\n- Close companies in which a relevant person is a participator (for example a shareholder).\nThe above does not include all categories of relevant person. For a full definition go to ITA07/s809M.\nUnder the legislation, taxable remittances of an individual’s income or gains may be made by, and/or for the benefit or enjoyment of a relevant person, and this will result in a tax charge on the individual. |
| Relevant Tax Increase | This term is used in relation to computing the remittance basis charge payable by long-term residents. Broadly, it is a calculation that is the difference between the total amount of:\nincome tax and capital gains tax payable by a long-term resident remittance basis user subject to the remittance basis charge for the relevant tax year\nless\nincome tax and capital gains tax that would be due from a remittance basis user if they did not have to pay tax on their nominated income and gains. |
| Relevant Tax Year | The term is mostly used in relation to special ordering rules that may apply in certain circumstances; for example\nWhen computing the relevant tax increase and identifying whether a nomination of income or gains is needed in a relevant tax year.\nWhen identifying the nature and amount of a ‘transfer’ from a mixed fund. The year in which the transfer occurs is the ‘relevant tax year’.\nWhen nominated income and/or gains are remitted. The first time the rules apply, the relevant tax year is the year in which the nominated income or gains are remitted.\nThe year which is the ‘relevant tax year’ in any situation will depend on which legislative provision is being considered. |
| Remittance Basis | An alternative basis of taxation which can be used only by individuals who are resident in the UK but not domiciled in the UK.\nPrior to 6 April 2013 individuals who were resident but not ordinarily resident in the UK could also use remittance basis, but this concept has been removed from the legislation from this date.\nFor individuals using the remittance basis, their foreign income and foreign chargeable gains (for non-UK domiciled individuals only) are subject to UK income tax or capital gains tax only when ‘remitted’ to the UK. |
| Remittance Basis Charge | An annual tax charge of either £30,000 or £60,000 payable by UK resident individuals who claim the remittance basis, and who, in the year of claiming are:\n- aged 18 or over,\n- have either been resident in the UK for at least seven of the last nine tax years when the £30,000 charge applies (long-term residents),\n- or have been resident in the UK for at least 12 of the last 14 tax years when the £60,000 charge applies,\n- have £2,000 or more un-remitted foreign income and/or gains arising/accruing in the tax year.\nPrior to the introduction of deemed domicile there was a third level of charge - £90,000 for those individuals who had been UK resident in at least 17 of the previous 20 UK tax years. This applied for the 2015-16 and 2016-17 tax years only. |
| Residential Property | A building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use. ’Building’ includes part of a building.\nLand that is or forms part of the garden or grounds of a building above, (including any building or structure on such land). This includes an interest in or right over land. |
| Special Mixed Fund | An account held by an individual who is entitled to claim Overseas Workday Relief and who fulfils certain conditions. See RDRM35800 onwards. |
| Transitional Provisions | Rules introduced in Finance Act 2008 Schedule 7 to deal with the move from the previous legislation dealing with the remittance basis (up to and including 2007-2008) to the new legislation (from 2008-2009). |
| Un-remittable Income | This term is used at ITTOIA05/s841 and is largely relevant to taxpayers using the arising basis. It refers to any foreign income which is not able to be brought into the UK because of exchange controls, or a shortage of foreign currency in the foreign country.\nIt should not to be confused with the term ‘un-remitted foreign income or gains’. |
| Un-remitted Foreign Income and Gains | Any foreign income or gains of a remittance basis user that arises (or accrues) during the tax year, but which remains abroad and is not brought into the UK or otherwise regarded as ‘remitted’.\nThese foreign income or gains may be un-remitted because, for example, the individual chooses to use or to leave the money offshore. |