Income Tax (Trading and Other Income) Act 2005 Explanatory Notes

Section 832: Relevant foreign income charged on the remittance basis

3096.This section is based on section 65 of ICTA.

3097.The source legislation has separate rules for calculating the amount of income charged on the remittance basis under Schedule D Case IV and under Case V. As there is no significant difference in these bases in practice no such distinction is made in this section. See Change 133 in Annex 1.

3098.The words “in respect of relevant foreign income” have been included, indicating that the sums received should either comprise the relevant foreign income in question, or represent that income. Lord Radcliffe said in Thomson v Moyse (1960), 39 TC 291 HL (page 335):

No doubt proper construction of those words [sums received] require that the sums computable must be “of” the income, by which I would understand “sums of money derived from the application of the income to achieving the necessary transfer”.

3099.Generally, relevant foreign income charged on the remittance basis is charged on the full amount of sums received in the United Kingdom without any deductions. However, the source legislation (tail words of section 65(5)(b) of ICTA) permits such deductions as are allowed under the Income Tax Acts in respect of profits chargeable under Schedule D Case I, that is, income from a trade but not from a profession or vocation.

3100.Subsections (3) and (4) also apply the deductions to income from a profession or vocation carried on wholly abroad. This recognises that, in the context of income arising in the United Kingdom, the calculation of income from professions and vocations uses the trading income calculation rules. See Change 134 in Annex 1.

3101.Paragraph 150 of Schedule 2 to this Act ensures that the remittances taxed by virtue of this section may include income which arose before the tax year 2005-06.

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