If an individual is defined as a non-UK domiciled, they do not pay UK tax on foreign income or gains if they do not remit this income into the UK.
How much do I have to pay to claim remittance?
- it is free of charge for the first six years of residency.
- £30,000 if you have been resident for seven out of the last nine years.
- £60,000 if you have been resident for twelve out of the last fourteen years.
Are there any disadvantages by claiming remittance?
If you are a UK resident claiming the remittance basis of taxation in a tax year, you will lose your entitlement to your tax-free personal allowances.
However, if you have small amounts of unremitted foreign income and gains (that is, less than £2,000 per UK tax year), you will not lose your tax-free personal allowance.
How do I define if income has been remitted to the UK?
Commonly foreign income and gains are ‘remitted to the UK’ if –
- brought to, or received in, or used in the UK by you or another relevant person.
- brought to, or received in, or used in the UK for your benefit or that of another relevant person.
- used to pay for a service provided in the UK to you or another relevant person.
- used to pay for a service provided in the UK for your benefit or that of another relevant person.
- used outside of the UK for a relevant debt in the UK.
Examples
1.David buys a painting outside of the UK using his foreign income. He subsequently brings the painting to his home in the UK. This is a remittance by David. The painting derives from or comprises David’s’ foreign income.
2.John buys a villa outside of the UK using his foreign income. He subsequently sells the villa and buys a country retreat in the UK using the total proceeds of the sale. This is a remittance by John of the foreign income he used to buy the villa and of any chargeable capital gain that accrued on the sale of the villa.
Who is defined as relevant person?
- the individual themselves, that is, the person to whom the foreign income and gains belong.
- the individual’s spouse or civil partner, or people living together as if they are spouses or civil partners.
- the individual’s children or grandchildren under 18 years of age (this includes children or grandchildren of their spouse or civil partners)
- trustees of a settlement, if any other category of relevant person is a beneficiary of the settlement.
- a close company in which any other category of relevant person is a participator (for example, a shareholder) and its subsidiaries.
- a non-resident company in which any other category of relevant person is a participator, and which would be a close company if it were resident in the UK, and its subsidiaries.
Do I need to complete a UK tax return to claim remittance?
If you have no UK income or gains in the tax year, other than taxed UK income (for example, PAYE employment income) or less than £100 of untaxed income and have not been UK resident for more than six of the previous nine tax years no formal claim for the remittance basis is needed. However, if you are required to complete a tax return for other forms of income, you will need to fill out the remittance section on your tax return.
Remittances from a mixed fund
A mixed fund is a fund of money or other property which contains more than one type of income or capital (including ‘foreign chargeable gains’) and/or income or capital from more than one tax year. A typical example is a bank account into which different types of income, such as bank interest, dividends and earnings, or capital have been paid.
There are strict statutory ordering rules that you must apply to identify which amounts of income and foreign chargeable gains from within a mixed fund you have remitted.
If you can identify the make of your mixed fund, you can transfer money from one offshore account to another to cleanse it. Any such transfers must be one of money, you cannot cleanse a mixed fund asset, unless you sell it first.
You must nominate any transfers from a mixed fund that you’ve cleansed and retain records as proof of the nomination.
