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This publication is available at https://www.gov.uk/government/publications/remittance-basis-hs264-self-assessment-helpsheet/hs264-remittance-basis-2018
This helpsheet is for individuals who pay tax on the remittance basis. It provides information to help you complete the ‘Foreign’ pages of your tax return and must be read together with the ‘Foreign notes’.
The remittance basis
The remittance basis is an alternative tax treatment that’s available to individuals who are resident but not domiciled in the UK and have foreign income and gains. Remittance basis isn’t available if you’re deemed domicile in the UK. You’ll be deemed domicile if you were born in the UK with UK domicile of origin and UK resident in 2017-2018 tax year, or you’ve been UK resident for at least 15 of the previous 20 tax years and UK resident in 2017-2018 tax year.
You can find information about residence, domicile and the remittance basis of taxation in the booklet Guidance note for residence, domicile and the remittance basis: RDR1. The guidance for deemed domicile changes will be published in due course.
If you’re taxable on the remittance basis, you’re liable to UK tax in the normal way on your UK source income and gains. But you’re only liable to UK tax on any remittances (amounts) of foreign income and gains that you remit to the UK (see below for what we mean by ‘remitted to the UK’). If you choose to be taxed on the remittance basis you must include these remittances on your tax return. The supplementary pages that you complete will depend on what it is that you have remitted. For example, you may need the ‘Capital Gains Tax summary’ pages, the ‘Employment’ pages or the ‘Foreign’ pages.
From 6 April 2015 if you sell (or dispose of) the whole or part of an interest in a UK residential property when non-resident you must tell HM Revenue and Customs (HMRC) within 30 days of conveyance and you may have to pay Capital Gains Tax on any gains you make. See Capital Gains Tax for non-residents: UK residential property.
Claiming the remittance basis
If you decide to claim the remittance basis for the tax year 2017 to 2018, you’ll need to complete the ‘Residence, remittance basis etc’ pages. You can get these from the Self Assessment: Residence, remittance basis etc (SA109) or the Self Assessment Orderline.
The remittance basis doesn’t apply to chargeable event gains under a policy of life insurance, life annuity or on a capital redemption policy. These are taxable on the full amount arising in the year, irrespective of whether they’re remitted or not.
Remitted to the UK
Commonly foreign income and gains are ‘remitted to the UK’ if they (or something deriving from them) are:
- 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
A remittance won’t only occur if you remit the actual or original foreign income and gains to the UK. You’ll also make a remittance if you remit something that derives from them to the UK.
Jules 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 Jules. The painting derives from or comprises Jules’ foreign income.
Jules 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 Jules of the foreign income he used to buy the villa and of any chargeable capital gain that accrued on the sale of the villa.
Whilst the monies (apart from the amount relating to the capital gain which is an original gain) brought to the UK to acquire the country retreat aren’t Jules’ original foreign income, they originate or derive from them.
Most remittances to the UK will be under the general rules but there are additional rules under which your foreign income and gains may be remitted to the UK. For example, you gift some of your foreign income or gains or something deriving from them to a person other than a relevant person - a gift recipient. It’s still possible for there to be a remittance of your foreign income or gains if the gift is used in such a way that it benefits a relevant person.
Your money or property doesn’t have to be physically imported from overseas for a remittance to occur. For example, it could be money you receive in the UK from another UK resident, in return for money or assets representing your foreign income and gains transferred to them abroad.
A relevant person is:
- the individual themselves, that’s, the person to whom the foreign income and gains belong
- the individual’s spouse or civil partner, or people living together as if they’re 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
You can find more information about the remittance basis of taxation and the meaning of terms such as ‘remitted to the UK’ and ‘relevant person’ in booklet Guidance note for residence, domicile and the remittance basis: RDR1.
From 6 April 2012, remittance basis taxpayers who bring their foreign income and gains, or something deriving from those income and gains, to the UK, and invest them in a qualifying target company may claim relief from the UK tax charge that would otherwise arise. See section 2 of Guidance Note: Changes to the Remittance Basis for detailed information about business investment relief. To claim this relief you should complete form Residence, remittance basis etc pages. There have been some changes to the business investment relief provisions effective from 6 April 2017, and guidance on these will be published in due course.
Deciding what you have remitted
If you make a remittance to the UK from an account containing a single source of income for a single year, for example, employment income, you can easily identify what it is that you have remitted. But if you don’t have funds segregated in this way your remittance may be from a mixed fund.
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.
If you purchase an asset outside the UK, for example a car, the car may also be a mixed fund. That will be the case where money from more than one source or from more than one tax year is used to buy the car.
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.
You can find detailed guidance on the treatment of remittances from mixed funds before the 2017 Finance Bill changes in booklet Guidance note for residence, domicile and the remittance basis: RDR1.
Cleansing of mixed funds
If you can identify the make of your mixed fund you can transfer money from one offshore account(s) to another in order to cleanse it. Any such transfers must be one of money, you can’t 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.
You’ll only be able to cleanse your mixed funds from 6 April 2017 until 5 April 2019.
Rado has an offshore bank account and immediately before making the transfer nomination it contains:
|£150,000||foreign gain from 2011 to 2012|
|£100,000||foreign income from 2011 to 2012|
|£75,000||foreign income from 2012 to 2013|
|£50,000||foreign gain from 2013 to 2014|
|£250,000||UK income from 2014 to 2015|
Rado meets the qualifying conditions and so on 16 September 2018 nominates the following to 2 new bank accounts:
|To account A|
|£150,000||2011 to 2012 foreign gain|
|£50,000||2013 to 2014 foreign gain|
|To account B|
|£100,000||2011 to 2012 foreign income|
|£75,000||2012 to 2013 foreign income|
Leaving the balance of £250,000 UK income in the original account, Rado has successfully cleanse this mixed fund account.
Completing the ‘Foreign’ pages
Box 1 Unremittable income
If you’re taxable on the remittance basis, don’t complete box 1. The amount of foreign income on which you’re taxable is the amount you remit. Any amount that can’t be remitted, for example, because of exchange control regulations in another country, shouldn’t be shown in your return or ‘Foreign’ pages.
Box 2 Foreign Tax Credit Relief (FTCR)
If you’ve already paid tax in another country on any amounts of foreign income that you’ve remitted to the UK, the rules for allowing credit for foreign tax paid are the same as for any other UK taxpayer. The ‘Foreign notes’, page FN 1, explains the rules.
If you only remit part of a particular amount of foreign income, you can only claim credit for the same part (the proportionate share) of any admissible foreign tax that may have been deducted from that income.
Jenny is taxable on the remittance basis and is liable to UK tax at the rate of 40%. Interest of £9,000 is paid into her foreign bank account after deduction of tax in the ‘other’ country at the rate of 10% which is available as a credit against UK tax on that income. Jenny decides to remit £4,500 of this interest to the UK.
As Jenny has remitted half of the net amount of the interest she was paid, she’s able to claim half of the admissible foreign tax as a credit against UK tax on the income. Jenny must pay UK tax as follows:
(half the income has been remitted and so half the foreign tax is available as a credit against UK tax)
|UK tax (40%)||£2,000|
|Amount to pay||£1,500|
If Jenny doesn’t claim FTCR but instead claims a deduction for the foreign tax paid, she is liable to UK tax on the amount remitted of £4,500 × 40% = £1,800.
Special Withholding Tax
Special Withholding Tax (SWT) is an amount of tax withheld on certain payments to UK residents under the terms of the European Savings Directive and equivalent third party agreements. This tax will be in addition to any foreign tax deducted by the country of origin of the payment. The countries that may deduct SWT are listed below:
- San Marino
- Saint Maarten
Where SWT is deducted you’re treated as having paid, in the year of deduction, an equivalent amount of Income Tax in the UK. This can be set against your UK tax liability of that year, including the remittance basis charge, or repaid to you if the amount exceeds that liability.
This applies to any tax deducted from foreign income or gains under the UK/Swiss Tax Cooperation Agreement that you opt to have treated as a payment on account. You should make a claim to have the withholding tax treated in this way on your return and you should also supply the certificates provided by your Swiss paying agent to confirm the amounts of withholding tax deducted.
If you don’t take this option and HMRC deems the tax paid clears your liability to UK tax in relation to the relevant income or gains, you won’t be able to subsequently claim a repayment.
If the remittance basis applies to you, amounts of SWT repaid to you, or set against your Income Tax liability, will be treated as a remittance of income at the time it’s set off or repaid.
Grace received £8,000 of interest from a Liechtenstein account after deduction of SWT of £2,000. Grace is non-domiciled in the UK and claims for her foreign income to be taxed on the remittance basis.
Grace didn’t remit any of the money from her Liechtenstein account but includes an equivalent amount of Income Tax in her return for the SWT to set against other UK tax liability.
Enter on pages F 2 and F 3 of the ‘Foreign’ pages:
|Country or territory code (page F 2 column A)||LIE|
|Amount of income received (page F 2 column B)||£0|
|SWT (page F 3 column D)||£2,000|
Setting off the SWT against Income Tax liability will mean that part of the interest income is remitted to the UK and will be a taxable amount at that time. Normally the ‘set-off’ will be regarded as having been at 31 January following the tax year.
Grace will therefore have to enter taxable income of £2,500 on her next tax return (remittance £2,000 increased by the rate of SWT (20%) £500; total £2,500). She won’t be entitled to any relief for SWT for that year as the full amount has been relieved in this tax year.
If you use the remittance basis and you remit part of your foreign income after SWT is deducted, then the amount of your income remitted is calculated by including the appropriate proportion of the SWT.
You’re still able to claim the whole amount of SWT deducted in the year at column D.
Adam received interest of £800 from Jersey after deduction of SWT of £200. Adam is non-domiciled in the UK and claims for his foreign income to be taxed on the remittance basis. £400 of the interest was remitted to the UK.
|Interest received in UK||£400|
Enter on pages F 2 and F 3 of the ‘Foreign’ pages:
|Country or territory code (page F 2 column A)||JEY|
|Amount of income received (page F 2 column B)||£500|
|SWT (page F 3 column D)||£200|
As in example 5, the £200 set-off will be a further remittance at the date it’s set off and subject to the same calculation until the total of the income, £1,000 is taxed. In this example, £250 of income should be included on the tax return of the year when the SWT £200 is set off.
Income from overseas sources
All entries on pages F 2 and F 3 must be in UK sterling, not foreign currency. You should convert any foreign currency amounts you ‘remitted to the UK’ to sterling at the rate of exchange that applied on the date of your remittance. If the remitted amount was credited to a sterling bank account you can use the same rate of exchange that was used by your bank.
If you aren’t sure of the exchange rate to apply, ask your tax adviser or refer to the foreign exchange rates.
Box 4 Dividends from foreign companies taxed using the remittance basis in an earlier year
If, in the 2017 to 2018 tax year, you remitted to the UK, foreign dividends taxed using the remittance basis in an earlier year, put this amount in box 4. You must tell us in ‘Any other information’ on page TR 7 of your tax return, the total amount of dividends included in box 4 and the amount that doesn’t qualify for UK tax credit.
Boxes 5 and 6 Dividends from foreign companies
If you’re taxable on the remittance basis, you’re liable to UK tax on dividends paid by foreign companies that are ‘remitted to the UK’ at the normal tax rates (currently 20%, 40% and 45%) and not at the special rates applicable to dividends (currently 7.5%, 32.5% and 38.1%).
From 6 April 2016 the UK Dividend Tax Credit will be replaced by a new tax-free Dividend Allowance. The Dividend Allowance means that you won’t have to pay tax on the first £5,000 of your dividend income, no matter what non-dividend income you have.
Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.
You’ll pay tax on any dividends you receive over £5,000 at the following rates:
- 7.5% on dividend income within the basic rate band
- 32.5% on dividend income within the higher rate band
- 38.1% on dividend income within the additional rate band
If you haven’t paid tax because you’re within the Dividend Allowance then you can’t claim FTCR on that income. You should show dividends ‘remitted to the UK’ in 2017 to 2018 on pages F 2 and F 3 of the ‘Foreign’ pages in the rows headed ‘Dividends from foreign companies’. Don’t include dividends of an earlier tax year in which you also paid tax on the remittance basis. See box 4 above.
If you’re taxable on the ‘arising basis’ in 2017 to 2018, you’re also taxable on any remittances of income or gains that you make in 2017 to 2018 that arose or accrued in an earlier year in which you were taxed on the remittance basis. If you remitted foreign dividend income please follow the instructions on page FN 6 of the ‘Foreign notes’.
If you’re taxable on the remittance basis, you don’t qualify for the 10% reduction in the chargeable amount of a foreign pension. Instead, you’re taxable on the amount of your pension that’s ‘remitted to the UK’.
It’s possible that you have a pension that isn’t taxable in the UK because of the terms of a double taxation treaty. To claim that your foreign pension isn’t taxable in the UK, please provide the following information in the ‘Any other information’ box on your tax return (or on a separate sheet) the:
- payer of the pension
- relevant double taxation treaty on which you are relying
See information about the terms of Double Taxation Agreements entered into by the UK.
Boxes 14 to 24 Income from land and property abroad
If you choose to be taxed on the remittance basis you’re only taxable on the amount of overseas property income that you bring into the UK. You’re not able to reduce the amount of income on which you’re liable to UK tax to take account of any losses you may have suffered.
Don’t fill in boxes 14 to 24 or box 26, 31 or 32. Instead, you should complete columns A to F and boxes 25 and 27 to 30 in the ‘Summary’ section. See page FN 9 of the ‘Foreign notes’ - entering the amount you brought into the UK.
If you have paid any foreign tax and you haven’t remitted all the income to the UK, you’ll have to apportion the foreign tax accordingly.
Richard’s overseas rents are £10,000, on which foreign tax of £2,000 was paid to the overseas tax authority. If Richard brings £6,000 of the income to the UK, the foreign tax attributable to that amount is:
6,000 ÷ 8,000 × 2,000 = £1,500
Richard should enter £7,500 (that is, £6,000 plus £1,500) in column B and £1,500 in column C.
For more information about online forms, phone numbers and addresses contact Self Assessment: general enquiries.