INTM601100 | Transfer of assets abroad: The income charge: Measure of income - introduction

The income of a person abroad is subject to the income charge on an individual if the conditions referred to in INTM600640 and/or INTM600660 are met. Income is not defined in the legislation and is given its general meaning. This is more fully described in INTM600400.

In order to quantify the income of a person abroad, it is first necessary to establish the character of the income in the hands of the person abroad, consider whether the particular type of income would be chargeable by applying UK tax principles, and allow deductions in accordance with the UK tax code to arrive at the amount subject to the income charge.

This principle was established in the case Lord Chetwode v CIR (51 TC 647), where Lord Wilberforce found that, because there was no definition of income in the UK tax code,

what as income is chargeable within income tax is left to be determined according to particular heads of charge under the Schedules.

The person abroad may for example be a trading company, an investment company, a mixed trading, investment company or a trust. However, note that the provisions do not apply to income assessable under the controlled foreign companies’ (CFCs) legislation (INTM600720).

In considering whether the income charge is applicable in respect of a particular item, consideration needs to be given as to whether it is income for all the purposes of the Taxes Acts and not just for the purpose of a particular taxing provision.

The following pages set out below give examples of particular types of income and how we treat them for the purpose of the income charge. The list is not, nor is it intended to be, exhaustive.

INTM601120 Trading companies

INTM601140 Investment companies

INTM601160 Stock or scrip dividends

INTM601180 Accrued income scheme

INTM601200 Offshore income gains

INTM601220 Chargeable events

INTM601240 Dividends

INTM601260 Profit on exchange

INTM601280 Income from property