Bank Transfers to UK Accounts Were Remittances, UT Rules

In a case concerning a taxpayer who was not domiciled in the UK, the Upper Tribunal (UT) has upheld a decision that transfers from his overseas bank accounts to UK bank accounts of non-relevant persons amounted to taxable remittances under Section 809L of the Income Tax Act 2007. However, a finding that purchases on an overseas credit card were also remittances was set aside.

The taxpayer had moved to Dubai in 2007 and had become non-resident in the UK, but became resident again from 2014 as a result of time spent in the UK. He claimed the remittance basis of taxation. After he submitted a tax return for the 2016/17 tax year which did not include any remittances, HM Revenue and Customs (HMRC) enquired into the return and subsequently issued closure notices in the amount of £133,682. HMRC concluded that transfers from his bank account in Dubai to UK bank accounts belonging to his adult son, family and friends, none of whom fell within the definition of 'relevant persons' in Section 809M(2) of the Act, were taxable remittances, as were transfers in respect of his son's attendance at university. Purchases made using his overseas credit card, including UK university expenses and gifts of jewellery to people in the UK, were also remittances. He appealed to the First-tier Tribunal (FTT).

The FTT found that the bank transfers constituted remittances, rejecting the taxpayer's argument that electronic bank transfers do not involve property being brought to the UK for the purposes of Section 809L(2)(a) of the Act. The credit card purchases were also remittances: payments made using an overseas credit card for goods and services in the UK constitute remittances, creating a 'relevant debt' under Section 809L(7). The FTT accepted HMRC's case that the purchase is treated as being equivalent to the cardholder authorising the credit card provider to pay the bill on their behalf.

Ruling on the taxpayer's further appeal against that decision, the UT considered that the reference to 'money' in Section 809L(2)(a) included money in a bank account. The word is routinely used with that meaning, and it seemed reasonable to assume that that was what Parliament had intended. Excluding money in a bank account from the definition in Section 809L(2)(a) would also produce a bizarre result, given that a bank transfer is the most obvious way of remitting funds. The FTT had not erred in concluding that by making the bank transfers, the taxpayer had remitted funds to the UK.

In respect of the credit card purchases, the UT observed that the FTT appeared to have gone straight to the question of whether a relevant debt was created, without addressing whether the purchases involved bringing property into the UK within the meaning of Section 809L(2)(a). There could only be a relevant debt that gave rise to remittance if there was something the debt could relate to that fell within Section 809L(2), and the FTT had not explained what that was. The finding that the purchases were remittances was set aside and the question remitted to the FTT.