RDRM31480 - Remittance Basis: Introduction to the Remittance Basis: Transitional Provisions: Relevant persons and foreign income and gains arising before 6 April 2008

Paragraph 86(1) and (4) Schedule 7 Finance Act 2008

Background

Finance Act 2008 extended the range of circumstances in which foreign income and gains become taxable when they are remitted to the UK. One change is the introduction of the concept of ‘relevant person’RDRM33030 at ITA07 s809L. One result of this change to the legislation is that, from 6 April 2008, a taxable remittance is made when foreign income or gains are brought into or are otherwise used in the UK by a range of persons other than the individual themselves.

Transition

The transitional rule provides that in establishing whether there has been a remittance of an individual’s income and gains for 2007-2008 or any earlier year Conditions A and B, Condition C and Condition D at ITA07/s809L (refer to RDRM33000) are applied as if references to ‘relevant person’ are to the individual.

Effect

A taxable remittance is not made where cash or propery of an individual that is, or is derived from, foreign income or gains of 2007-2008 or any earlier year is identified as having been brought to, received by or used in the UK, (or used in respect of a ‘relevant debt’ - see RDRM33040) by, or for the benefit of, anyone other than the individual.

Example

Sanjay is a non-domiciled remittance basis user who transferred £10,000 of his foreign employment income from 2007-2008 to his 15 year old grandchild’s offshore bank account. In 2008-2009 the grandchild then remits £3,000 of this to the UK to buy himself a new computer. Under the rules at section 809L this would create a taxable remittance of £3,000 by Sanjay because his grandson is a relevant person. However the transitional rule means that there is no taxable remittance of this income because it is employment income from 2007-2008.

Note: The exclusion of ‘relevant persons’ from s809L for pre 6 April 2008 income and gains does not apply in considering the other transitional rules in relation to the remittance of relevant foreign income (refer to RDRM31140 Relevant foreign income).