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Withdrawal of concessional treatment for commercial loan arrangements under the remittance basis

HMRC announced on 4 August 2014 that they are replacing their guidance regarding the tax treatment of commercial loans obtained by remittance basis users and secured against foreign income and gains. The changes will take effect immediately.


Where remittance basis users have obtained a loan in the UK or overseas and that loan was:

  1. Secured using foreign income or gains that remain overseas, and
  2. Wholly or partly remitted to the UK

then technically, under the strict wording of the legislation,both the collateral and any payments servicing the loan (i.e payments of interest and repayments made from foreign income and gains) are treated as taxable remittances.

For example if a non domiciled individual (non dom) has a £1 million loan facility secured by foreign income and gains and £100,000 is borrowed and brought to the UK, then the non dom is treated as making a taxable remittance of £100,000.

HMRC’s position prior to 4 August 2014

HMRC recognised that this tax treatment could result in a double tax charge if the loan is repaid from another source of foreign income or gains. As a result, in 2010, they introduced a concession  to ensure only the servicing payments would be taxable, not the underlying collateral.

HMRC’s position from 4 August 2014

HMRC have now announced that this concessionary treatment is being withdrawn and from 4 August 2014 both the collateral and the servicing payments (if made from different foreign income of gains) will be taxable remittances.

Action required

All non doms who have used foreign income or gains as collateral for a loan and not declared a remittance must take the following action:

  • Notify HMRC by 31 December 2015 that the foreign income or gains security has either been replaced or will be replaced by non-foreign income or gains security by 5 April 2016.


  • Repay the loan that was remitted to the UK before 5 April 2016.

We will be writing to all clients affected by these new changes. Please contact your usual Mercer & Hole contact if you have any queries.



Date: 8th August, 2014
Author: Lisa Spearman


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