Although the new 6 April 2017 rules for non-UK domiciled individuals have not been finalised yet, we still have a reasonable idea of how they will work. One thing that we do know with reasonable certainty is that any non-UK domiciled individuals who have been UK resident for 15 out of the last 20 years as at 6 April 2017 and who have paid the remittance basis charge, will, for capital gains tax purposes, have the opportunity to rebase offshore assets to market value on 6 April 2017. Such individuals will also be completely free to remit any pre 6 April 2017 gain to the UK free from tax. This is prima facie an extremely generous concession and means that non-UK domiciled individuals who have never paid the remittance basis charge should consider whether they should do so.
Omar considers himself to be non-UK domiciled, although he has lived in the UK for over 20 years. He has never elected to pay the remittance basis charge due to the fact that the level of his offshore income and gains have never merited its payment. He certainly intends to continue this habit because since 6 April 2015 he would have been liable to pay a £90,000 charge to be taxed on this basis. Not so fast! Omar also owns significant offshore assets, including a villa in France worth £3M which was acquired for £1M 15 years ago.
Paying £90,000 in respect of a year’s remittance basis charge may seem a bargain in the context of the future tax that it would save. Just in respect of the villa the £90,000 payment would save future tax of £560,000 (£2M at the residential capital gains tax rate of 28%). Clearly Omar would also want to check the tax rules where the assets are located.
It gets better! We remind Omar that he is still in time to make a remittance basis claim for 2012/2013 as there is a 4 year time limit from the end of the tax year. Omar only has to pay £50,000 for that year, therefore the whole decision is made much easier.
There are however other considerations to effectively rewriting his tax position in an earlier year. Most importantly, the need to understand what remittances have been made since 2012/13, as they will now be subject to tax. Whilst the remittance basis charge is higher in 2016/17, for those individuals who have brought offshore funds into the UK, it will be simpler to administer than electing in an earlier year.
There will be taxpayers who miss this valuable point. Hopefully there is nothing in the final drafting of the legislation that changes the above analysis.
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