What exception does section 809YF of the Income Tax Act 2007 provide?

Section 809YF provides an exception to the deemed remittance rules when exempt property is lost, stolen or destroyed and a compensation payment is received. If the entire compensation is taken offshore or used to make a qualifying investment within 45 days of receipt, the underlying foreign income and gains continue to be treated as not remitted to the UK.

What conditions must be met to benefit from the section 809YF exception?

Two conditions must be met. Condition A requires the entire compensation payment to be taken offshore or used to make a qualifying investment within 45 days. Condition B applies where a qualifying investment is made: the remittance basis user must formally claim relief by the first anniversary of 31 January following the tax year in which the payment is released.

What happens if the compensation payment is later brought back to the UK?

If any part of the compensation payment that was taken offshore or invested is subsequently brought back to the UK, that action counts as a remittance at the time it occurs. The mixed fund ordering rules then determine which types of foreign income and gains are treated as remitted, based on the composition of the original exempt property.

How do the business investment provisions apply under section 809YF?

Where the compensation is used to make a qualifying investment, the business investment provisions apply to the income and gains treated as not remitted. If the investment was funded by a combination of the compensation payment and other money, only the portion attributable to the compensation payment is treated as 'the investment' for those purposes.

Income Tax Act 2007 section 809YF

Exception to section 809Y: compensation taken offshore or invested

Section 809YF provides an exception to the deemed remittance rules when exempt property is lost, stolen or destroyed and a compensation payment is received, provided the compensation is taken offshore or used to make a qualifying investment within 45 days.

When exempt property is lost, stolen or destroyed and compensation is received, the property is not treated as remitted to the UK provided the compensation is taken offshore or used to make a qualifying investment within 45 days of receipt
If any part of the compensation is used to make a qualifying investment, the remittance basis user must claim relief by the first anniversary of 31 January following the tax year in which the payment is released
The income and gains originally treated as not remitted when the exempt property was brought to the UK continue to be treated as not remitted, but any subsequent dealings with the compensation payment after it has been taken offshore or invested can trigger a remittance at that later point
Where the compensation is used to make a qualifying investment, the business investment provisions apply to the relevant income and gains, and if the investment was funded by more than just the compensation payment, only the portion attributable to the compensation is treated as "the investment" for those purposes

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