RDRM35460 - Remittance Basis: Amounts Remitted: Offshore Transfers: Composition of a mixed fund - debts

20Where any part of a debt relating to property is directly or indirectly repaid from income or capital, in whole or in part, or from anything derived from income or capital, the property is treated as consisting of or containing that income or gains (ITA07/s809R(3)).

The practical effect of this provision is that income or capital in a mixed fund that is used to pay either the interest or the principal amount of a loan that is related to property remains subject to the ordering rules in s809Q(3) and is taxable as a remittance.

Example

On 6 April 2013 Steffan takes out an offshore loan of £70,000 to purchase some antiques overseas. He repays the loan over 2013-2014, using £30,000 of his relevant foreign earnings and £15,000 of his relevant foreign income for that year; the remainder is paid from his inherited ‘capital’. The antiques are treated as consisting of or containing the income and capital used to pay the debt.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Refer to RDRM35470 for example