Income Tax (Trading and Other Income) Act 2005 section 689A

Temporary non-residents

Section 689A deals with the tax treatment of distributions from close companies received by individuals during a temporary period of non-UK residence, ensuring that such distributions are taxed as if received on the individual's return to the UK.

• Distributions received from close companies during a temporary period of non-residence are treated as received in the period of return, bringing them back into charge to UK income tax
• The rule applies where the individual was a material participator in, or an associate of a material participator in, the distributing close company at a relevant time — broadly, in the year of departure or the three preceding tax years
• The distribution must be one that would have been taxable had the individual received it while UK resident, and the rule also catches cases where double taxation relief could have applied even if no claim was actually made
• Where the remittance basis applies for the year of return, any qualifying distribution that is relevant foreign income and was remitted to the UK during the non-resident period is treated as remitted in the period of return