RDRM31270 | Remittance Basis: Introduction to the Remittance Basis: Comparisons with pre-April 2008 regime: Changes to old regime - offshore loans

Before tax year 2008-2009 an individual was able to avoid making a remittance of relevant foreign income RDRM31140 by using relevant foreign income to pay interest on a loan that had been obtained outside the UK and which had subsequently been received in the UK.

The most common example of this was the offshore mortgage where the individual borrowed money from a foreign bank to buy a property in the UK and paid the interest on the loan out of relevant foreign income.

Following the introduction of the new rules in Finance Act 2008 relevant foreign income, can no longer be used in this way to pay interest on monies loaned after 12 March 2008 without the payment of interest being treated as a remittance.

The one exception is for loans already in existence before 12 March 2008 that relate to the acquisition of an interest in residential property in the UK. Relevant foreign income used to pay the interest will still not be treated as a remittance but this is subject to comprehensive transitional provisions. Refer to RDRM31500: Transitional Provisions - Relevant foreign income and offshore loans.

Repayment of the loan itself using relevant foreign income was a remittance before the changes introduced in Finance Act 2008 and will continue to be so.