Remittance basis changes
Find out about changes to the remittance basis rules from 6 April 2017.
Before 6 April 2017 you could claim the remittance basis if:
- you were UK resident
- your domicile of origin was overseas and you hadn’t acquired a UK domicile of choice
- you were born with a UK domicile of origin but had acquired a domicile of choice (or dependency) overseas
Changes from 6 April 2017
From 6 April 2017 you’ll be taxed on the arising basis on your worldwide income and gains if you:
- were born in the UK and have a UK domicile of origin
- were resident in the UK for at least 15 of the 20 tax years immediately before the relevant tax year
Example
Jamal, who was born in the UK and had a UK domicile of origin, moved to New Zealand aged 20, staying there for many years and acquiring a domicile of choice there.
He then came back to the UK to work on a 2 year secondment for his employer in New Zealand, becoming resident here. He intends to return home to New Zealand after his secondment.
If he had returned to the UK before 6 April 2017 Jamal would be treated as non UK domiciled and would be able to use the remittance basis.
If Jamal returns to the UK after 6 April 2017 he will be treated as UK domiciled from the date he returns to the UK. He will be unable to use the remittance basis and will be taxed on the arising basis on his worldwide income and gains.
The remittance basis charge
From 6 April 2017 the remittance basis charge changed to 2 levels of charge:
- £30,000 for non-domiciled individuals who have been resident in the UK for at least 7 of the previous 9 tax years immediately before the relevant tax year
- £60,000 for non-domiciled individuals who have been resident in the UK for at least 12 of the previous 14 tax years immediately before the relevant tax year
The £90,000 charge no longer applies from 6 April 2017, because of the deemed domicile changes brought in from that date.
The £90,000 charge still applies for the years 2015 to 2016 and 2016 to 2017 if you’re UK resident in at least 17 of the preceding 20 UK tax years for either year.
Example
Blanche, a non UK domiciled individual, has been resident in the UK since tax year 1999 to 2000 and has always claimed the remittance basis.
From 6 April 2008 she paid the £30,000 RBC, this changed to £50,000 from 6 April 2012 to 5 April 2015 (when the higher charge was introduced).
From 6 April 2015 Blanche paid £60,000 RBC and from 6 April 2016 she paid the £90,000 RBC. The final year Blanche will pay the RBC is 2016 to 2017, as she will be treated as deemed domiciled from 6 April 2017 – Blanche has been in the UK for more than 15 of the last 20 tax years, so she meets Condition B.
Remittances of foreign income or gains
If you used the remittance basis before 6 April 2017 but after that date you’re deemed domiciled for UK tax purposes you must continue to tell HM Revenue and Customs (HMRC) when you remit any foreign income or gains to the UK that arose in a year when you claimed the remittance basis.
Any remittances made in a year when you’re deemed domicile in the UK, from funds that arose in an earlier year when you claimed the remittance basis are still taxable in the year they’re remitted to the UK.
Example
Nikki, due to the number of years she has lived in the UK, is deemed domiciled from 6 April 2017 under Condition B. Prior to this she claimed the remittance basis for a number of years.
Nikki is offered the chance to buy land adjoining her UK country home and decides to take advantage of this limited offer. She remits the proceeds of a foreign gain which arose in tax year 2014 to 2015, a year for which she claimed the remittance basis.
She will have to declare this gain on her Self-Assessment tax return for the year in which she remits it to the UK.
Less than £2,000 unremitted foreign income or gains
The new deemed domicile legislation at section 835BA (chapter 2 of part 14 of ITA 2007) doesn’t apply if you’ve used the remittance basis under the provisions of section 809D ITA 2007.
However, you must ensure that unremitted foreign income and gains are under £2,000 for the relevant tax year before deciding if you’re not deemed domicile in the UK for Income Tax and Capital Gains Tax.
Example
Juan has used the remittance basis under section 809D for a number of years. From 6 April 2017 he has been in the UK for more than 15 of the last 20 tax years and so becomes deemed domiciled in the UK, having satisfied Condition B.
However, for 2017 to 2018 , as Juan still meets the conditions for section 809D he can continue to use the remittance basis for as long as he meets those conditions.
On 15 September 2019 Juan sells his Caribbean holiday home, placing the proceeds in one of his foreign bank accounts.
When completing his 2019 to 2020 UK tax return Juan won’t be able to use the remittance basis under section 809D because his unremitted foreign income and gains are more than £1,999.
Juan will be taxed on the arising basis for the year and, even though he hasn’t remitted any of the sale proceeds, he must declare the foreign gain on his Self-Assessment return.
Until his unremitted foreign income and gains reduce to less than £2,000 in a specific tax year Juan won’t be able to use the remittance basis. He will be treated as deemed domiciled and taxed on his worldwide income and chargeable gains.
Allowances
If you become deemed domiciled and subject to UK tax on your foreign income or gains you may be able to claim the dividend and personal savings allowances.