HM Revenue & Customs’ (HMRC) guidance states that a remittance is ’any money or other property which is or derives from your offshore income and gains which are brought to, received or used either directly or indirectly in the UK for your benefit or the benefit of any other relevant person.’
Therefore, transactions like a bank transfer would be a remittance if sent to a UK bank account from an overseas account. This also includes meeting the payment for a service, where the payment is made using foreign income.
A remittance can arise through the actions of other people linked to an individual known as “relevant persons”. A remittance can occur to the UK if any property consisting of, or representing, or deriving from, foreign income or foreign chargeable gains is brought to the UK or used for the benefit of a relevant person.
A relevant person includes spouses, civil partners and their minor children or grandchildren.
The following transactions can constitute a remittance to the UK:
- Bank transfers.
- Cash gifts.
- Paying for services or goods in the UK from an overseas bank account.
Assets that are brought into the UK, cannot be chargeable as a remittance if those assets are considered exempt property. Common examples of exempt property are items such as clothing, footwear, jewellery, and watches. However, if these items are then sold a taxable remittance can occur.
Assets that cost less than £1,000 funded from foreign income or gains can be brought into the UK and not be classed as a remittance.
A taxable remittance causes a tax charge on the money or property brought into the UK, but these charges can be mitigated with careful tax planning before arriving in the UK.
Can my parents make cash gifts to me in the UK if they live overseas?
If funds are received from a non-UK domiciled and non-UK resident individual, for example to purchase a property in the UK for a UK resident individual, then there should be no tax to pay for the recipient of the gift. However, the individual making the gift will want to obtain tax advice from the country in which they live.
Can I make a gift to a family member in a foreign country?
Gifts made to a relevant person in either money or assets will be classed as remittances if these are then brought into the UK by that person.
Gifts to non-relevant persons will not be classed as remittances providing you are not able to gain any enjoyment from the money or property if it is brought to the UK.
Gifts to individuals in another country that are never brought to the UK are not classed as a remittance.
Why do I need several different bank accounts before I move to the UK?
Where an individual has a bank account overseas, that contains a mix of more than one type of income or capital gains, this can lead to additional complexities when bringing funds into the UK.
Clean capital can be brought into the UK without triggering any Income Tax or Capital Gains Tax consequences. Clean capital is typically considered funds that are held by an individual before becoming UK resident. Clean capital can also include things such as inheritance money.
However, if more than one type of income is in a bank account it then becomes a mixed fund, which can have unwanted tax consequences, with a distinct order for how funds are brought to the UK. Therefore, a way to counteract this is to segregate your different types of funds (income, capital gains, clean capital) into different bank accounts, and keep them separated to ensure that you can bring funds to the UK in the most beneficial tax way.
Can I make mortgage payments from my overseas bank account for my UK property?
Whilst there is nothing from stopping an individual from doing this, this would be classed as a remittance for tax purposes, as this is using overseas funds in the UK. Therefore, we would advise that you pay mortgage payments from a UK bank account if possible.
Do you need help with remittance?
The remittance basis of taxation can be quite complex and there are a number of issues to be considered before you become a UK tax resident to ensure that you maximise your opportunity not to pay UK tax on funds that you remit to the UK. We recommend that an individual seeks appropriate professional advice before remitting any funds to the UK.
Tags: International Taxes