Back to Back loans and Remittance
The Government has announced that it is withdrawing its current treatment for commercial loan arrangements secured using unremitted foreign income or gains as collateral for a loan enjoyed in the UK. Money brought to or used in the UK under a loan facility secured by foreign income or gains will be treated as a taxable remittance of that amount of foreign income or gains. If the loan is serviced or repaid from different foreign income or gains, the repayments of capital and interest will constitute remittances in the normal way. HMRC have updated their guidance at RDRM33170.
HMRC consider that a large numbers of arrangements are not commercial and are not within the intended scope of the guidance. There was no consultation prior to the announcement and was effective immediately following HMRC’s announcement on 4 August 2014. Further details from HMRC can be found here.
In particular, one should note HMRC's position on arrangements set up before 4 August. Non-doms who have used foreign income or gains as collateral for a loan and, in reliance on HMRC’s published position to date, have not declared a remittance will not be taxed on those foreign income or gains provided they notify full details to HMRC. HMRC will take no action to assess those remittances if the loan arrangements were within the terms of the concession in RDRM33170, provided:
- You give a written undertaking (which is subsequently honoured) by 31 December 2015 that the foreign income or gains security either has been, or will be replaced by non-foreign income or gains security before 5 April 2016, or
- The loan or part of the loan that was remitted to the UK either has been, or will be repaid before 5 April 2016
The notification should include the amount of foreign income or gains used as collateral and the amount of the loan remitted to the UK (if not the full amount). Notifications should be sent to:
HM Revenue & Customs
PTI Risk Team SO708
Room 220 PO
Box 203
BOOTLE
L69 9AP
