11 January 2022
It is necessary to consider UK-resident domiciled and not domiciled (not deemed to be UK domiciled) in the UK.
UK-resident domiciled (or deemed to be UK domiciled) individual must pay tax on his worldwide income and assets on arising basis. This means that the individual has to pay UK tax on his worldwide income and gains for the tax year in which they arise. It does not matter whether or not he brings the foreign income or proceeds from foreign gains to the UK.
UK-resident non-domiciled (and not deemed by HMRC to be UK domiciled) individual also has to pay UK tax on his UK income and gains on the arising basis but in relation to foreign income and foreign gains he can opt for (or ‘elect’) the remittance basis of taxation. Under the remittance basis the individual pay UK tax on UK income and gains for the tax year in which they arise, but he only pays UK tax on foreign income and foreign gains if and when they are brought (or ‘remitted’) to the UK.
If a non-domiciled individual has small amounts of unremitted foreign income and gains (that is, less than £2,000 per UK tax year), then the remittance basis applies automatically without the need to make any choice or claim. The person will continue to be entitled to UK tax allowances, including the personal allowance for income tax and the annual exempt amount for capital gains tax.
If unremitted foreign income and gains in a year is more than £2,000 then the individual will be taxed on the arising basis unless he claims (or ‘elects’) the remittance basis. If he has been a resident in the UK for at least seven out of the previous nine tax years, he can only elect to use the remittance basis if he pays a Remittance Basis Charge (RBC).
From 6 April 2017 the remittance basis charge has 2 levels of charge:
£30,000 for non-domiciled individuals who have been resident in the UK for at least 7 of the previous 9 tax years immediately before the relevant tax year
£60,000 for non-domiciled individuals who have been resident in the UK for at least 12 of the previous 14 tax years immediately before the relevant tax year
The remittance basis charge (of £30,000 or £60,000) must be paid in addition to any UK tax due on remittances to the UK, as well as any UK tax due on UK income and gains.
For further information on any of the points above, please, contact
Yuliya Shved at: yuliya@lexefiscal.com or
Dr Clifford J Frank at: clifford.frank@lexefiscal.com