Remittances and collateral
Since 2014 HMRC have taken the view that where foreign income and gains are used as collateral for a loan used in the UK, the collateral itself is deemed to have been remitted to the UK.
Unexpectedly, HMRC have recently amended their guidance, expanding the scope still further. It had been considered that the remittance of any of the foreign income and gains in the collateral was limited to the amount of the remitted loan (where the collateral exceeded this amount). However, a new example suggests that where the foreign income/gains used to purchase an asset used as collateral exceed the amount of the loan, the whole amount of the foreign income and gains will be deemed remitted. If correct, this does appear to be a further change of policy. It is worth noting that another example in a different part of the manual remains and contradicts this “new” view. Industry bodies are seeking clarification, but in the meantime caution should be taken when potentially remittable collateral is offered. It should also be noted that this interpretation would only seem to apply when the full loan is brought to the UK. If part of the loan is not remitted, even a very small amount, the collateral deemed remitted is limited to that part of the loan used in the UK. It may therefore be advantageous not to use the whole loan in the UK.