Loans secured on foreign income

The CIOT has published a note highlighting the changes in HMRC’s approach to the treatment of loans made to remittance basis users (RBUs) where assets of the borrower are held by the lender.

This note applies to present or former RBUs who have otherwise unremitted foreign income and gains (FIGs). It is relevant where the RBU has incurred a debt (the ‘relevant debt’) either in the UK or abroad and the money borrowed or property deriving from it is brought to the UK or used in the UK in such a way as would constitute remittance.

HMRC’s latest position is that all FIGs used in respect of the relevant debt are to be treated as remitted if 100% of the borrowed money is brought to the UK. But if not all the borrowed money is brought to the UK, a cap still applies, being what is brought to the UK.

Tax advisers will need to consider the implication of this change of practice when filing on behalf of RBUs. HMRC’s current approach is set out in its Residence, domicile and remittance basis manual at RDRM37050.