The Remittance Basis
The remittance basis (RB) applies to UK resident individuals who are not domiciled in the UK.The advantage of the RB is that if it is claimed, foreign income and gains are not taxed in the UK unless they are remitted to the UK. If the RB is not claimed then the arising basis will apply which means that the individual’s worldwide income and gains will be taxable. A claim for the RB is made on the individual’s tax return and will trigger a charge depending on how long the individual has been UK resident.
Remittance Basis Charge
Previously if an individual had been UK resident for seven or more of the preceding nine tax years, a Remittance Basis Charge (RBC) of £30,000 would be payable. If they had been UK resident for 12 or more out of the preceding 14 tax years then this would be £50,000.
Changes to bands
In the 2014 Autumn Statement it was announced that the RBC will increase to £60,000 if an individual is resident for at least 12 of the preceding 14 years and a new RBC of £90,000 will also be introduced for individuals who have been resident for at least 17 years out of the preceding 20 years. This will take effect from 6 April 2015.
Because of the increase in the RBC it is likely that quite a few non-domiciled individuals will choose to be taxed on the arising basis from 2015/2016 onwards. Given that they will be paying tax they should structure their affairs so that they are able to remit this income and gains to the UK free from further tax. Action should be taken before 6 April 2015 to achieve this. This will include taking steps to ensure that income which arises after 5 April 2015 is held in different accounts to pre 6 April 2015 ‘unremitted income’. Without appropriate action such individuals could be faced with ‘taxed income’ being trapped offshore.
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