BKL tax adviser Terry Jordan answers a reader’s query in Taxation magazine. This addresses the tax implications of a purchase “airside” in an international airport in the UK by a non-UK domiciled, UK resident remittance basis user.
Are overseas gains remitted to the UK if a purchase is made in an airside shop?
My client is not domiciled in the UK, but is UK resident and taxed on the remittance basis. In summer 2014, she flew out of the UK from Heathrow. Once she was through security and airside, she purchased an expensive computer with her overseas credit card.
Airport airside shops are duty free and are outside the UK for VAT purposes. However, does this count as a purchase in the UK for the purposes of calculating how much of her overseas gains she has remitted to the UK?
Query 18,547 – Draft
Reply from Terry “Lacuna” Jordan, BKL
What an interesting question. Draft’s client is a non-UK domiciled but UK-resident individual who is taxable on the remittance basis.
Draft notes that “airside” shops are duty-free and treated as outside the UK for VAT purposes and asks whether his client’s purchase of an expensive computer at Heathrow constitutes a remittance to the UK.
It is reported that Russian foreign minister Sergei Lavrov asserted that Edward Snowden, the US whistleblower, had not entered Russia because he was airside at Sheremetyevo airport, but that statement was treated with scepticism.
I do not think there is any doubt but that airside at Heathrow is part of the UK and that the client’s purchase constituted a taxable remittance within ITA 2007, s 809L.
Similarly, embassies are the sovereign territory of the country in which they are located, not of the country whose diplomatic mission is housed there.
The Vienna Convention states that the local government forswears the right to enter an embassy and diplomatic immunity protects the diplomats working inside. This does not mean that space is transmuted into foreign soil or legal territory for the purposes of law enforcement. I wonder whether Julian Assange is a remittance basis user?