What is qualifying foreign income under section 845H of ITTOIA 2005?

Qualifying foreign income under section 845H is income that falls within one of twenty-three specified categories of foreign-source income and is not disqualified income under section 845I. These categories include overseas trade profits, foreign interest, non-UK dividends, foreign pensions, overseas property profits, and offshore fund income, among others.

What are the two conditions income must satisfy to be qualifying foreign income?

Income must satisfy two conditions. First, it must fall within one of the twenty-three categories listed in the table in section 845H, covering various types of foreign-source income. Second, it must not be disqualified income as separately defined in section 845I. Income failing either condition cannot benefit from the new resident relief.

Can settlement income or transfer of assets abroad income be qualifying foreign income?

Yes. Income attributed to a settlor under anti-avoidance settlement rules can qualify if it arises from a foreign source. For capital sums paid to a settlor, only the foreign amount of available income qualifies. Income deemed to arise under transfer of assets abroad rules can also qualify if classified as foreign under ITA 2007.

Does UK-source income qualify under section 845H?

No. Section 845H only covers foreign-source income. UK-source income, such as interest from a UK bank account, does not fall within any of the twenty-three categories and therefore is not qualifying foreign income. Such income is taxed in the normal way regardless of the individual's eligibility for new resident relief.

Income Tax (Trading and Other Income) Act 2005 section 845H

Qualifying foreign income

Section 845H defines the types of foreign-source income that count as "qualifying foreign income" for the purposes of the relief available to new UK residents on their foreign income.

Qualifying foreign income is income that falls within one of twenty-three specified categories and is not "disqualified income" under section 845I.
The categories cover a broad range of foreign-source income types, including overseas trade profits, overseas property business profits, foreign interest, dividends from non-UK resident companies, foreign pensions, offshore fund income, and various types of miscellaneous income arising outside the United Kingdom.
Income attributed to a settlor under the settlements legislation (such as where the settlor retains an interest or where capital sums are paid to the settlor) can also qualify, provided it arises from a foreign source, with a special calculation required for capital sums to determine the "foreign amount" of available income.
Deemed income under the transfer of assets abroad rules and certain income from qualifying asset holding companies (QAHCs) can also be qualifying foreign income, subject to specific conditions.

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