SAIM1160 - Savings and investment income: foreign income: unremittable income: claims

Unremittable income: claims and withdrawal of relief

A claim under ITTOIA/S842 does not mean that the income can be omitted from the tax return. The income must still be declared on the tax return but it will not be brought into charge if the claim is valid. This ensures that the amount of the income for each year is known so it can be assessed when the income becomes remittable.

Relief continues until the income becomes remittable. Exchange controls do change so anyone who makes a claim must check that the conditions for relief continue to be satisfied each year.

Withdrawal of relief

The income is assessable at the time it becomes possible to remit the income to the UK (ITTOIA05/S843). There is no requirement that the income must actually be remitted in order for the charge to arise. If the source has ceased, the income is taxed as if the source had not ceased (ITTOIA05/S844).

The income is treated as arising on the date on which the qualifying conditions cease to be satisfied. The foreign currency amount is translated into sterling at the market rate on that date, or if there is no market in the currency, the official exchange rate for the country concerned (ITTOIA05/S845).

Example

Martin has income from an interest-bearing account in Ruritania. Ruritania has exchange controls, and he cannot remit the income to the UK. The income first arises in 2002/03, when the account earns interest of 1,000 Ruritanian doubloons (RUD). RUD 1,250 arises in 2003/04, and RUD 1,600 in 2004/05. In March 2005, Martin travels to Ruritania, closes the account and spends the money.

On 1 January 2008, Ruritania lifts the exchange controls and the income becomes remittable. Martin has validly claimed relief under ITTOIA/S842 (1). But in 2007/08, the income is brought back into charge under ITTOIA/S843. It does not matter that he no longer possesses the source of income (ITTOIA05/S844 (4)). Martin must include total income of RUD 3,850 (1,000 + 1,250 + 1,600), translated into sterling at the exchange rate prevailing on 1 January 2008, in his 2007/08 self-assessment.