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Resources FAQ Capital Gains Tax Residence and domicile - the remittance basis and the £30,000 charge
Residence and domicile - the remittance basis and the £30,000 charge PDF Print E-mail

HM Revenue & Customs has recently published frequently asked questions about the new rules for taxing non-domiciles. We have reproduced the questions below.

I have a non-domiciled child. Will they be affected by these changes?
Yes. Children will be treated in exactly the same way as any other individual. However individuals under 18 will not have to pay the £30,000 charge until the year they turn 18.

I am currently able to use the remittance basis because I am not ordinarily resident. Will these changes affect me?
Yes. If you are resident in the UK but not ordinarily resident then the changes to the rules will be applied to you in the same way as they are applied to non-domiciles. You will have to make a claim for the remittance basis through the Self Assessment (SA) system and you may have to pay the £30,000 charge. You will lose access to personal allowances for Income Tax and the annual exempt amount for Capital Gains Tax if you chose to pay tax on the remittance basis.

Can I opt in and out of the remittance basis?
Yes. For example, it will be possible to claim the remittance basis in one year, opt for the arising basis the next year and then claim the remittance basis for the year after that.

If I remit £30,000 to the UK in order to pay the additional tax charge but I remit no other money, will I have to pay tax on the £30,000 when I remit it?
Yes. The £30,000 is in addition to any tax due on foreign income and gains remitted to the UK. It is up to the taxpayer whether they wish to pay the £30,000 charge by remitting money to the UK. However if the charge is paid directly to HM Revenue & Customs (HMRC) from an overseas account then the charge will not be treated as a remittance and there will be no tax liability.

I am a resident non-domicile and wish to pay tax on the remittance basis. How do I tell if I need to pay the £30,000?
From April 2008, you will need to pay the £30,000 charge for a tax year if:

  • you make a claim to have access to the remittance basis
  • you have unremitted foreign income and gains of £2,000 or more arising in the year of the claim
  • you are resident in the UK for that tax year
  • you have been resident in the UK for at least seven of the nine tax years immediately preceding that tax year

Will the seven year exemption from the flat rate charge be based on the taxpayer’s residence status for the tax year or will it be based on actual days spent in the UK?
It will be based on an individual’s residence status for a tax year. Split years will count as a year of residence. So from April 2008, you will need to pay the £30,000 charge for a tax year if:

  • you make a claim to have access to the remittance basis
  • you have unremitted foreign income and gains of £2,000 or more arising in that tax year
  • you are resident in the UK for that tax year
  • you have been resident in the UK for seven out of the preceding nine tax years

I am considering coming to the UK to work for three years but I am concerned about the £30,000 charge. How will this affect me?
Unless you have been resident in the UK quite recently, the proposals will probably not affect you.  From April 2008, you will need to pay the £30,000 charge for a relevant tax year if:

  • you make a claim to have access to the remittance basis
  • you have unremitted foreign income and gains of £2,000 or more arising in that tax year
  • you are resident in the UK for the relevant tax year
  • you have been resident in the UK for at least seven of the nine tax years immediately preceding the relevant year

How do I pay the £30,000 charge?
The £30,000 charge will be administered and collected through the SA system.

When will I have to pay the £30,000 charge?
The £30,000 charge will be administered and collected through the SA system and normal filing and payment dates will apply.

Will the £30,000 charge be off settable against tax in other countries for the purposes of Double Taxation Agreements (DTA)?
It is up to each individual country whether or not they consider the £30,000 charge to fall within the terms of their DTA with the UK.

I am a remittance basis user having to make a claim every year, how will I know when I have to pay the annual tax charge of £30,000?
You will be required to make a claim for the remittance basis in your SA tax return which you need to send to HMRC after the end of the tax year. When considering whether you are additionally liable to the £30,000 charge you will need to look back over the last 10 years, the tenth year being the year of claim. You will be resident for the year of claim, if you have also been resident for at least seven of the previous nine tax years, you will have to pay the charge.

In some cases you will know at the beginning of the tax year if you are going to claim the remittance basis. To see if you will be liable to pay the £30,000 charge you need to look back over the previous nine years, and if you have been resident for at least seven of those years you will have to pay the charge.

How will the £30,000 charge have to be paid from abroad to avoid it being treated as a taxable remittance?
The payment will need to be made direct to HMRC (for example by electronic transfer or a cheque drawn on a foreign bank account). If the sum in question is first paid into a UK bank account for onward payment to HMRC, then that will be a taxable remittance. The individual will need to keep sufficient records, such as a copy of the cheque drawn on an offshore bank account, to demonstrate that the payment was sent direct.

How will the £30,000 charge be collected?
The collection of the £30,000 charge will be administered through the SA tax return system. So any individual wishing to claim the remittance basis once they have been in the UK for more than seven out of the previous ten years will need to file an SA tax return and pay the £30,000 charge.

Will the £30,000 be collected through PAYE?
No. The collection of the £30,000 charge will be administered through the SA tax return system. So any individual wishing to claim the remittance basis once they have been in the UK for more than seven out of the previous ten years will need to file an SA tax return and pay the £30,000 charge.

Will the £30,000 charge apply to individuals who are regarded as resident in both the UK and another country with which the UK has a double taxation agreement (DTA)?
All years of actual residence in the UK will count towards the seven out of ten test, even if for some or all of those years the taxpayer was treated as 'treaty resident' in another country for the purposes of a DTA tie-breaker.

W
here a taxpayer is a dual resident (in the UK and another country) and has 'treaty residence' in the other jurisdiction, they will need to consider carefully whether a claim for the remittance basis of taxation actually makes financial sense compared to being taxed on the arising basis.
But where a taxpayer has already been UK resident for seven out of the previous nine years and in that year opts to claim the remittance basis, they will be liable to the £30,000 Remittance Basis Minimum Charge (RBMC), irrespective of 'treaty residence', if their unremitted foreign income and gains is £2,000 or more.

In cases where an individual leaves the UK or arrives here part way through a tax year and is entitled to the benefit of ESC A11 do they have to pay the full £30,000 charge?
Yes the £30,000 charge applies if you want to claim the remittance basis for the tax year. It does not matter if you are not present in the UK for the whole of the year.

 
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