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Changes to the IHT rules for non-doms - Loan collateral


Loan collateral

Following changes to the remittance basis in 2008, HMRC agreed on a concessionary basis that, where offshore income/gains were used as security for a loan taken out on commercial terms and used in the UK and the loan was serviced from another source, the funds used as collateral were not treated as remitted. It was therefore possible to take a loan using offshore income/gains as security and repay the loan and the interest using UK taxed income/gain without creating a tax charge. On 4 August 2014, HMRC withdrew the section in its manuals containing this 'concessionary' guidance and amended its stated approach.

From 4 August 2014, HMRC's position is, where money is brought to, or used, in the UK under a loan facility secured by foreign income/gains, this will be treated as a taxable remittance of that amount of foreign income/gains (limited to the value of the loan where the value of the security is higher). If the loan is serviced or repaid from different foreign income/gains, the repayments of capital and interest will constitute remittances in the normal way. Furthermore, HMRC provided a transitional rule with regard to existing loan arrangements. It stated that taxpayers who had entered into such arrangements should notify full details to HMRC of the arrangements and if this is done, HMRC would take no action to assess those remittances if the loan arrangements were within the terms of the earlier guidance and the taxpayer gave a written undertaking (which was subsequently honoured) by 31 December 2015 and the loan was be repaid or foreign income/gains used as collateral replaced by non-foreign income/gains security before 5 April 2016. On 15 October 2015, HMRC released Revenue and Customs Brief 16 (2015) which announces a revision to HMRC change of practice published on 4 August 2014 for the remittance basis treatment of foreign income/gains used as collateral for a loan brought into or used in the UK. With effect from 15 October, HMRC will not seek to apply the change announced on 4 August 2014 (treating the funds as remittances) to arrangements where the loan was brought into or used in the UK before that date. This means that from 15 October, there is no requirement under transitional provisions to repay or replace foreign income/gains collateral with non-foreign income/gains collateral before 5 April 2016.

HMRC has since confirmed that there is no longer any need to notify it of loans taken out before 4 August 2014. In addition, it is prepared to consider extending the transitional provisions, on a case-by-case basis, to loans which were in place by 4 August 2014 but not remitted to the UK until shortly after that date.

new iht rules for non doms


This section of TaxWorld examines New IHT rules for Non Domiciled individuals It includes various topic-sections:


Hopefully, these will provide some useful background on the issue, and equip you to make informed decisions and choices in this most financially sensitive of areas.

If you would like further assistance or more information on this subject please contact us through this email link enquiries@taxworld.org

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