Non-dom client came to UK in 1990's (accompanying spouse who came to UK for temporary work assignment but has stayed ever since) and has been resident in UK since. Client has offshore investments that currently comprise shares & bank deposit account. Up to 5/4/08 claiming remittance basis, so no income or gains declared up to 5/4/08. Since 6/4/08 all income & gains disclosed on arising basis. Current investments is a mixed fund containing pre 1998 capital, income & gains up to 5/4/08 and income & gains since 6/4/08.
My question is how should we treat expenditure deducted from the investments vis-à-vis allocating against the various components of the mixed fund. For example the expenses include portfolio management fees, bank charges & interest, and payments to offshore credit card (used for overseas expenditure & doesn't include any constructive remittances). Taking a simple example of a bank deposit of £100,000 comprising £50,000 original capital, £30,000 pre 6/4/08 income & gains and £20,000 post 5/4/08 income & gains. The fund incurs a bank charge of £1,000 reducing it to £99,000. Should the £1,000 be apportioned proportionately between the 3 components (£500, £300 & £200 respectively) or allocated on a first in first out basis or another way?
The treatment of the expenditure will determine the UK tax liability arising on any future partial or full remittances.