RDRM33030 - Remittance Basis: Identifying Remittances: Overview of identifying a remittance: Relevant person - definition

If the legislation was only to look at property brought to, or received or used in the UK directly by the remittance basis user themselves, they could ‘give away’ or otherwise ‘alienate’ their foreign income or gains offshore to a person they can control or otherwise trust to act on their behalf. The individual could then use that other person to then bring untaxed foreign income or gains into the UK for use by or for the individual themselves.

The concept of ‘relevant person’ was introduced in Finance Act 2008. It ensures that any foreign income or gains of an individual that are brought to the UK, (or used outside the UK but still regarded as ‘remitted’ to the UK under the rules at ITA07/s809L) by way of any relevant person, or for the benefit or enjoyment of any relevant person is taxed on the individual.

This is subject to any exemption that may apply (refer to RDRM34000).

For this reason the rules at ITA07/s809L and the following sections on the meaning of income and gains ‘remitted to the UK’ do not normally refer to the ’individual’ taxpayer.

Instead, the rules refer to remittances of an individual’s foreign income or gains being made by or for the benefit or enjoyment of a ’relevant person’. This broader definition aims to prevent individuals using family members, or other close associates or entities, to make or receive remittances (as defined at Conditions A to D RDRM33020), of their foreign income or gains and then avoiding UK tax by claiming it is no longer ‘their’ income or gains that has been remitted, or that it is not them who have made or benefited from the remittance.

Relevant persons are defined at ITA07/s809M as:

  1. the individual
  2. the individual’s husband, wife or civil partner
  3. a child or grandchild of the individual or the individual’s husband, wife or civil partner, (where the child or grandchild is under 18 years old)
  4. a close company in which any other category of relevant person is a participator (see Company Taxation Manual 60060 onwards), or from 22 April 2009 a company which is a 51% subsidiary of such a close company
  5. a company in which any other category of relevant person is a participator, and which would be a close company if it were resident in the UK, or from 6 April 2010 a company which is a 51% subsidiary of such a company
  6. the trustees of a settlement of which any other category of relevant person is a beneficiary,
  7. a body connected with such a settlement.

Note: The legislation that applies from 6 April 2011 dealing with ‘employment income provided through third parties’ also uses the term ‘relevant person’. However, the definition of ‘relevant person’ at ITEPA03/s554a is different to that at ITA07/s809M. See EIM45090.

For the purpose of ‘2’ above a man and woman living together as husband and wife and two people of the same sex living together as if they were civil partners of each other are treated as if they were husband and wife or as if they were civil partners of each other.

There is a no minimum period for cohabitation; it is a question of fact as to whether two individuals are living together as spouses or civil partners.

The meaning of ‘married persons, or civil partners living together’ is given at ITA07/s1011:

“Individuals who are married to, or are civil partners of, each other are treated for the purposes of the Inome Tax Acts as living together unless:

(a) they are separated under an order of a court of competent jurisdiction,

(b) they are separated by a deed of separation, or

(c) they are in fact separated in circumstances in which the separation is likely to be permanent.”

Where a married couple or civil partners are separated, the separated spouses or civil partners are taxed on their actual entitlement to income.

For the purpose of ‘4’ above:

  • “close company” has the same meaning as in the Corporation Tax Acts (see CTA10/s439)
  • “participator” in relation to a close company, means a person who is a participator for the purposes of CTA10/s454 and s455 and in relation to a company that would be a close company if it were resident in the UK, means a person who would be such a participator if it were a close company
  • “51%subsidiary” has the same meaning as in the Corporation Tax Acts (see CTA10/s1154).

For the purpose of ‘6’ above, a beneficiary of a settlement means any person who receives, or may receive any benefit under or by virtue of the settlement.