Non-doms: Remittance Basis

A person who is resident in the UK is normally taxed on the “arising” basis. This means that they will pay UK tax on all their income as it arises and on their gains as they accrue, wherever that income and those gains are in the world.

The remittance basis is an alternative to the “arising basis” and can only be used when the person in question is resident in the UK during a tax year and:

- he/she is not ordinarily resident in the UK,or

- he/she is not domiciled in the UK.

In addition it only applies if the person has foreign income and/or gains during a tax year in which he/she is resident in the UK.

When the remittance basis is used, the person may only have to account for UK tax on foreign income and/or gains when these are brought into the UK. However, UK tax still has to be paid on all UK-source income and gains as they arise or accrue.

Even if you are eligible to use the remittance basis, it does not mean that you have to use it. You might decide instead to pay UK tax on your worldwide income and gains on the arising basis and claim relief from UK tax for foreign tax that you have also had to pay. You may choose to do this rather than lose your personal allowances as your tax bill could be higher on the remittance basis.

If you decide to use the remittance basis, the impact of these special rules will depend on your personal circumstances:

- how much of your foreign income and/or gains that arise in a tax year you decide to leave outside the UK;

- whether or not you are aged 18 or over, and

- how long you have been resident in the UK.

These factors will determine whether you can use the remittance basis without having to make a formal claim or if you need to make a claim to use it. They will also determine whether you will need to pay the £30,000 Remittance Basis Charge.

If you have less than £2,000 unremitted foreign income and/or gains which arise or accrue in the relevant tax year you can use the Remittance Basis without making a claim.

If you have £2,000 or more unremitted foreign income and/or gains arising/accruing in the relevant tax year and you want to use the remittance basis you must make a claim for that year.

RKG Consulting will be pleased to advise you whether you are eligible to use the remittance basis, whether you should use this basis, how to make the claim and also to help you in carefully structuring remittances to the UK.