RDRM35160 - Remittance Basis: Amounts Remitted: Remittances of 'nominated' income or gains: Example 1 - Continued
Moving forward, in 2014-2015 Alexandria has relevant foreign earnings of £80,000, but no other foreign income or gains. She decides not to use the remittance basis in that year.
In 2014-2015 Alexandria actually brings into the UK;
£5,000 Jersey relevant foreign income that she did not nominate in 2013-2014 (Note 1)
£80,000 relevant foreign earnings from 2013-2014 and
£80,000 relevant foreign earnings from 2014-2015
Although Alexandria is not using the remittance basis in 2014-2015, the ordering rules at ITA07/s809J are still required to determine what she is to be taxed as having remitted in that year. The relevant year is 2014-2015.
Ordering rules at 2014-15
Step 1
Identify nominated income and gains remitted in the relevant year (2014-2015) – £nil. Relevant amount £85,000.
Identify the remittance basis income and gains remitted in the relevant year - £85,000 (refer to note 2).
Step 2
Find the total amount of the individual’s foreign income and gains (excluding those nominated) for the relevant tax year. If the remittance basis was not used for that year, (that is sections 809B, 809D or 809E did not apply), treat those amounts as nil and go to step 6.
Step 6
If the relevant amount is not nil start again at Step 2. Take the reference to ‘relevant year’ to be a reference to foreign income and gains of the individual for the earliest ‘appropriate year’ previous to the last tax year from which Step 2 was undertaken.
Step 2
Find the total amount of the individual’s foreign income and gains (excluding those nominated) for the appropriate tax year (2013-2014) (refer to note 3) – para (d) foreign chargeable gains (not subject to a foreign tax) £65,000.
Step 3
Identify the earliest of paragraphs (a) to (h) above for which the amount determined at Step 2 is not nil – para (d) £65,000.
Step 4
Where the relevant amount is greater than the amount identified above, the relevant amount is reduced by the amount identified. Relevant amount reduced to - £85,000 less £65,000 = £20,000.
Step 5
If the relevant amount is not nil go back and repeat Step 3. Take the reference to first paragraphs (a) to (h) as a reference to the earliest paragraph not previously taken into account under Step 3.
Step 6
If the relevant amount is not nil after Steps 3 to 5 have been completed for the year, start again at Step 2. Take the reference to relevant year to be a reference to foreign income and gains of the individual for the earliest ‘appropriate year’ previous to the last tax year from which Step 2 was last undertaken.
Step 2
Find the total amount of the individual’s foreign income and gains (excluding those nominated) for the appropriate tax year 2012-2013 – para (a) relevant foreign earnings (not subject to a foreign tax) £280,000.
Step 3
Identify the earliest of paragraphs (a) to (h) above for which the amount is not nil – para (a) £280,000.
Step 4
If the relevant amount is less than the amount identified, treat the whole of the remaining amount of the transfer as coming from that item of income or gain.
So in 2014-15 Alexandria is treated as having remitted:
- £20,000 relevant foreign earnings
- £65,000 foreign chargeable gains
NB - The £80,000 relevant foreign earnings from 2014-2015 that she brings in will be taxed on the arising basis in that year.
Note 1 - In 2013-2014 Alexandria has £80,000 of Jersey relevant foreign income, of which £75,000 were nominated; if this £80,000 were all in the one single account, and there was nothing else in the account then, under the principle of this section the first £5,000 remitted in 2014-2015 is accepted as being ‘not-nominated’ income.
In this example it is of little practical difference because the s809J ordering rules have already been ‘triggered’ in 2013-2014 by her remittance of nominated income (from 2010-2011).
But if the ordering rules had not already been triggered, then because, this £5,000 Jersey relevant foreign income in 2014-2015 can be accepted as being ‘un-nominated’ income first and foremost, so Alexandria’s remittance of this £5,000 would not, of itself, have triggered the s809J ordering rules in this year.
Note 2 - Alexandria’s remittance basis income and gains are her total foreign income or chargeable gains for all tax years up to the ‘relevant tax year (2014-2015) in which she used the remittance basis under section 809B, section 809D or section 809E. It therefore excludes her relevant foreign earnings from 2014-2015 because she is not using the remittance basis in that year.
Note 3 - the ‘foreign income and gains ‘for’ the appropriate year exclude any:
- ‘nominated’ income or gains, or
- income or gains that were actually remitted to the UK before the beginning of the appropriate tax year or
- income or gains that were treated as remitted to the UK previously under section 809J before the beginning of the appropriate tax year.
In Alexandria’s case, the £5,000 Jersey relevant foreign income from 2013-2014, and the £80,000 relevant foreign earnings from 2013-2014 that she actually remitted in 2014-2015 were treated as having been remitted in 2013-2014 by the ordering rules (refer to the earlier part of example 1 RDRM35150).
Summary
| Year | Accruing in year | Actually brought to UK | Treated as remitted |
|---|---|---|---|
| 2010-2011 | £250,000 | Nil | Nil |
| 2011-2012 | £300,000 | £140,000 | Nil |
| 2012-2013 | Nil | Nil | Nil |
| 2013-2014 | £130,000 | Nil | £130,000 |
| 2014-2015 | Nil | Nil | Nil |
Relevant foreign income: Nominated
| Year | Arising in year | Actually brought to UK | Treated as remitted |
|---|---|---|---|
| 2010-2011 | £75,000 | £30,000 | Nil |
| 2011-2012 | £75,000 | Nil | Nil |
| 2012-2013 | £75,000 | Nil | Nil |
| 2013-2014 | £75,000 | Nil | Nil |
| 2014-2015 | Nil | Nil | Nil |
Relevant foreign income: Not nominated
| Year | Arising in year | Actually brought to UK | Treated as remitted |
|---|---|---|---|
| 2010-2011 | Nil | Nil | Nil |
| 2011-2012 | £5,000 | Nil | Nil |
| 2012-2013 | Nil | Nil | Nil |
| 2013-2014 | £5,000 | £5,000 | £5,000 |
| 2014-2015 | Nil | Nil | Nil |
Relevant foreign earnings
| Year | Arising in year | Actually brought to UK | Treated as remitted |
|---|---|---|---|
| 2010-2011 | £200,000 | Nil | Nil |
| 2011-2012 | £120,000 | Nil | Nil |
| 2013-2013 | £280,000 | Nil | £20,000 |
| 2013-2014 | £150,000 | £130,000 | £150,000 |
| 2014-2015 | £80,000 | £80,000 | Nil |