In this age of globalisation and political unrest, foreign banks are perhaps not as safe as they once were. It is not unheard of for governments to seize accounts and stop funds leaving their country. Although this is a nightmare scenario and the best advice must be to get your funds into the UK as soon as possible (where you can be hit by a weakening currency rather than sanctions!) this can happen and there are some useful tax rules which should not be overlooked when it does.
The legislation allows an election to be made to treat certain income as non-taxable. Here, it is important to understand that income always needs to be included on a tax return but it can be relieved through the election which effectively makes it non-taxable.
The key conditions which need to be met to make a valid election are as follows:
The time limit here is key because an election needs to be made by a year after 31 January following the tax year in which the foreign income arises. After this time the tax liability will stand even if the funds have effectively been lost.
As you would expect there are also various provisions which bring the income back into charge if it is ‘recovered’. This income would then be taxed in the year of recovery.
Ideally, tax payers will take care to keep their earnings in ‘safe’ jurisdictions, but this will not always be possible. Where there is a cause for concern it makes sense to test whether funds can be remitted before the 31 January deadline (above). If the funds are ‘trapped’ then it should at least be possible to ‘un-trap’ the tax that has been paid!
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