HMRC confirm treatment of remittances upon divorce

In 2012, HMRC confirmed to CIOT that remittances to the UK made pursuant to and following a divorce would not be chargeable (see letters below). However, concerns were raised in 2022 following the First Tier Tribunal case of Sehgal and Meehan that HMRC might have changed their approach; confirmation of the position was sought and the CIOT has received the following update from HMRC:

HMRC’s Position on Remittances Upon Divorce

In your correspondence of 19 December 2022 you asked us: 

The case of Sehgal and Meehan [2022] TC 8581 and HMRC’s stance on remittances upon divorce. In 2012, correspondence from HMRC (attached), confirmed that remittances to the UK from abroad will not be chargeable if part of a divorce settlement. In the First Tier Tribunal case, HMRC’s argument was that this position was no longer correct. However, this case involved three parties and submissions made in the tribunal would seem to suggest that the position stated by HMRC in the 2012 would remain in place for bi-party situations. Are you able to confirm that, in case of bi-party divorce proceedings, HMRC’s position as outlined in the 2012 letter remains intact? 

We set out in our correspondence to you of 29 June 2023 that HMRC's position, as put to the First-tier Tribunal (Tax Chamber) in the case of Sehgal and Mehan, is that the meaning of 'property' in s.809L is wide and capable of including contractual rights received or used in the UK. We considered that this included the right to be released from an indemnity in the UK. We explained that whether or not property has been received or used in the UK as part of a particular transaction or arrangement, including as part of divorce proceedings, will depend on the specific facts of the case.  

Having subsequently discussed the matter at the meeting of representatives from HMRC, CIOT and STEP in September 2023, we agreed to take away and consider the comments and concerns that you raised with us. In that time, HMRC put forward their position at the Upper Tribunal in Sehgal and Mehan [2024] UKUT 00074.

In light of the Upper Tribunal decision, we can confirm that HMRC’s position is as outlined in 2012. As you will recall, CIOT wrote to HMRC setting out a hypothetical divorce scenario and asked whether there would be a taxable remittance if, as part of a divorce settlement, remittance basis users made a payment offshore out of their foreign income and gains, which was kept offshore by the other party until after the divorce was finalised. A taxpayer’s husband, wife or civil partner is a ‘relevant person’, so normally anything they bring to the UK is included when considering what has been remitted by the taxpayer - this ceases when the decree absolute is received, so anything brought to the UK by a person’s ex-partner after a divorce would not usually cause a remittance. We can confirm that, as set out in our response to you in 2012, HMRC agree that there is no taxable remittance in the scenario outlined, provided the money paid is kept offshore until after the divorce is finalised, and no relevant person benefits in the UK.  

As noted in our 2012 letter, a materially different set of facts may lead to a different conclusion, as whether there has been a remittance in accordance with section 809L ITA 2007 will depend on the facts and circumstances of the case. 

Section 809L - Income Tax Act 2007 - CIOT letter (June 2012)
Section 809L - Income Tax Act 2007 - HMRC response (September 2012)