HMRC's guidance on the taxation of non-UK domiciled individuals who remit funds to the UK after taking out a loan overseas using unremitted income and gains as collateral has been subject to a number of changes in recent years. 

A subscibers 'At a glance' guide to changes to the remittance basis concession on overseas loans.

This affects Non-UK domiciled individuals who are taxed on the Remittance basis and who:

  1. Take out a loan overseas.
  2. Use the funds raised from the loan to purchase assets in the UK or remit the loan funds directly to the UK.
  3. Use unremitted overseas income or gains as collateral for the loan.
  4. Use unremitted overseas income or gains to service the loan, that is to pay down the capital or interest.

Prior to 4 August 2014

There were potentially two taxable remittances:

  • The foreign income or gains used as collateral.
  • The foreign income or gains used to make the repayments.

HMRC recognised that there would potentially be a double charge arising and therefore by concession, the use of the funds as collateral would not be treated as a taxable remittance where the loans were made on commercial terms and regularly serviced using foreign income or gains.

After 4 August 2014

HMRC withdrew the concession. Where money is brought to the UK in these circumstances after this date there will potentially be two taxable remittances.

HMRC agreed not to seek to tax monies brought into the UK before 4 August 2014 as long as:

  • By 5 April 2016 the foreign collateral had been replaced with non-foreign collateral.
  • By 5 April 2016 amounts brought into the UK had been repaid.
  • By 31 December 2015 a written undertaking for the above was given to HMRC.

Announcement on 15 October 2015

HMRC accepted that for some loan arrangements it would be difficult or impossible to comply with the requirements set out on 4 August 2014 to replace collateral or repay monies brought into the UK.

HMRC, therefore, did not seek to change the tax treatment where monies were brought into the UK before 4 August 2014. These amounts did not have to be repaid and the collateral does not have to be replaced.

Monies brought into the UK after 4 August 2014 have continued to be taxed on the collateral and on the loan repayments.


Jean-Luc is a non-UK domiciled, UK resident who uses the remittance basis of taxation.

  • He has the equivalent of £1m in a bank account in France which represents unremitted income earned outside of the UK.
  • He takes out a loan for £1m in France and uses this bank account as collateral for the loan.
  • He agrees to make repayments of £100,000 per year which he funds from a regular source of income earned in France.
  • He uses the £1m loan to set up a business in the UK, including the acquisition of commercial trading premises in December 2013.

Prior to 4 August 2014

Jean-Luc's repayments of £100,000 per year would be treated as remittances and taxable in the UK. However, he would be able to take advantage of HMRC's concession so that the use of the bank account as collateral would not be considered a remittance.

After August 2014

Jean-Luc would have to undertake to repay the £1 million that he brought into the UK before 5 April 2016 or replace the collateral, for example with the UK business premises, to avoid HMRC assessing to UK tax the remittance of £1m in December 2013.

After the announcement on 15 October 2015

Jean-Luc no longer has to repay the loan or replace the collateral. HMRC will not seek to assess the collateral as a remittance to the UK. The regular repayments will continue to be taxed as remittances.

If the £1m had been used to set up a business and purchase trading premises in the UK in December 2014, the collateral and the repayments would both be treated as remittances to the UK.

2021 update

HMRC guidance has historically been that the amount of collateral remitted to the UK will be capped at the level of the debt. This appears to have changed between December 2020 and July 2021, although HMRC have not publicised it.

HMRC's new position is that where the whole of the loan is brought to the UK, the whole of the collateral will be remitted, even when in excess of the value of the loan. 

Where the loan is not fully brought to the UK, the collateral remitted will be capped at the level of the UK loan. 

HMRC have provided examples in their guidance at: RDRM37050 and RDRM35270.

Note that this guide covers HMRC guidance which is not the law. The Institute of Chartered Accountants in England and Wales (ICAEW), Society of Trust and Estate Practitioners (STEP) and Chartered Institute of Taxation (CIOT) released, in May 2022, a technical note which highlights several different interpretations of the underlying legislation. See: Treatment of loans secured on foreign income or gains by remittance basis users.

2023 update

The CIOT and STEP made announcements confirming that, following discussions, HMRC would review their position in respect of cases where the whole loan is brought into the UK, and whether the value of such a remittance is capped at the value of the loan rather than the amount of foreign income and gains used as collateral. 

What's New?

Proposed reforms to Non-Domicile taxation and the Remittance Basis

Useful guides on this topic

Remittance basis (overseas income)
What is the remittance basis? Who can claim it and when? What are the advantages of claiming the remittance basis and how much is the remittance basis charge?

Non-domicile status, deemed domicile & tax
Who is non-UK domiciled? What does this mean for UK Income Tax, Capital Gains Tax and Inheritance Tax? What reliefs are available to non-doms?

External links

HMRC manuals

RDRM35270 Remittance Basis: Amounts Remitted: Mixed Funds: Remittances from mixed funds - collateral in respect of relevant debts

RDRM35050: Remittance Basis: Amounts remitted: Quantification: Condition B - Collateral in respect of relevant debt

CIOT, ICAEW and STEP note: Treatment of loans secured on foreign income or gains by remittance basis users

CIOT 2023 update: HMRC to review their position on remittances

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