CG25387 | Remittance basis: mixed funds: ordering rules: example

Changes from 6 April 2025

The remittance basis has been abolished and new rules have been introduced from the 2025/26 tax year.

The latest guidance can be found in RFIG for Residence and RDRM for Domicile manuals.

Please note that cases which occur from 6 April 2025 onwards will be determined in accordance with the new rules.

Dmitri is a remittance basis user in all tax years. As at 31 December 2010 he has a bank account in Moscow which contains the money from several sources (sterling used throughout for simplicity- see CG25391 - CG25394 for notes on exchange differences).

On 31 May, he uses £500,000 from this account to buy a small football club in Scotland. Has any of the income or gains been remitted to the United Kingdom?

The bank account is a mixed fund because it contains, or derives from, more than one of the kinds of income and capital listed at ITA07/S809Q(4). Money or other property has been brought to, received or used in the UK by a relevant person (Dmitri) and so the first condition A for there to be a “basic remittance” is met (see CG25341 above). The matching rules in ITA07/S809Q therefore apply to determine whether the second condition B is also met and, if so, the amount of income or gains remitted.

Step 1: categorise the mixed fund

These categories and others, and the order in which they are to be considered, are specified by ITA07/S809Q(4).

Step 2: match the transfer with the first category.

The amount in the first category (employment income; £25,000) is less than the amount transferred (£500,000) so the transfer is treated as containing all that income.

Step 3: reduce the amount transferred.

The reduced amount of the transfer is £500,000 - £25,000 = £475,000

Step 4: return to step 2

Step 2(2): match the transfer with the second category

The amount in the second category (relevant foreign income; £5,000) is less than the reduced amount transferred (£475,000) so the transfer is treated as containing all that income.

Step 3(2): reduce the amount transferred

The reduced amount of the transfer is £475,000 - £5,000 = £470,000

Step 4(2): return to step 2

Step 2(3): match the transfer with the third category

The amount in the third category (foreign chargeable gains; £100,000) is less than the reduced amount transferred (£470,000) so the transfer is treated as containing all those gains.

Step 3(3): reduce the amount transferred

The reduced amount of the transfer is £470,000 - £100,000 = £370,000

Step 4(3): return to step 2

Step 2(4): match the transfer with the fourth category

The amount in the third category (other capital; £500,000) is more than the reduced amount transferred (£370,000) so the transfer is treated as containing £370,000 of capital. (If the £500,000 capital comes equally from two sources, the transfer is treated as containing £185,000 from each source.)

In summary, the transfer is treated as a remittance of £25,000 employment income plus £5,000 relevant foreign income plus £100,000 foreign chargeable gain and tax is charged accordingly.

Going forward, the balance of £130,000 in the mixed fund is treated as consisting wholly of capital.