RDRM36340 | Remittance Basis: Remittance Basis up to 6 April 2008: Mixed Funds: Remittances from a mixed fund - Example 2

From HM Revenue & Customs · Remittance Basis and Domicile Manual

Cleo has lived in the UK for many years. She has paid UK tax on the remittance basis for all relevant tax years and has decided that she will do so again for 2006-2007.

Cleo has an overseas employment and her net salary for that work of £10,000 a month is paid into an account in the Channel Islands. Dividends from shareholdings in a number of foreign companies are also paid into the Channel Islands account.

Channel Islands Account

Tax year 2006-2007

Date	Descriptor	Credit £	Debit £	Balance £	Note
-	Balance b/f	-	-	47,000	1
31 Dec	Overseas salary (no foreign tax paid)	10,000	-	57,000	-
31 Dec	Dividend	5,000	-	62,000	-
3 Jan	Transfer to UK account	-	5,000	57,000	-
31 Jan	Overseas salary	10,000	-	67,000	-
31 Jan	Dividend	5,000	-	72,000	-
3 Feb	Transfer to UK account	-	12,000	60,000	-
15 Feb	Dividend	2,000	-	62,000	-
29 Feb	Overseas salary	10,000	-	72,000	-
29 Feb	Interest	5,000	-	77,000	-
3 Mar	Transfer to UK account	-	8,000	69,000	-
31 Mar	Overseas salary	10,000	-	79,000	-
31 Mar	Dividend	5,000	-	84,000	-
3 Apr	Transfer to UK account	-	10,000	74,000	2

Note 1: The balance brought forward of £47,000 is made up of £40,000 overseas salary and £7,000 overseas dividends all arising in, and credited to the account during that tax year.

To establish the taxable amount of remittances made in the example above in 2006-2007 the account must be analysed. In this example the account contains a mixture of income, capital and gains. Using the principles described above in Scottish Provident v Allan (4 TC 409/591) the account (a mixed fund) contains sufficient amounts of untaxed income to match against the remittances. Cleo has made a taxable remittance of her foreign income of £35,000.

Note 2: If the foreign income had suffered overseas withholding tax, the terms of any relevant double taxation treaty must be taken into account. Refer to the International Manual INTM160000+ for details.