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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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Remittance Basis: Introduction to the Remittance Basis: Transitional Provisions: General earnings for years prior to 6 April 2008

Paragraph 82 Schedule 7 Finance Act 2008

Background

Prior to the introduction of Chapter A1, Part 14 ITA 2007, it was not necessary for an individual who was resident in the UK but who was not domiciled or not ordinarily resident in the UK to make a claim to be taxed on the remittance basis in respect of general earnings that were either chargeable overseas earnings or foreign earnings. This is because ITEPA03/s22 and ITEPA03/s26 provided that by ‘default’ the basis of taxation was the remittance basis in respect of these earnings.

ITA07/s809B-E provides that from 2008-09 the remittance basis applies only if the individual chooses to use it.

ITEPA03/s22 and ITEPA03/s26 were amended by FA08 with the effect that the default position is no longer that relevant foreign earnings are taxed only when remitted to the UK, but instead they are taxed on the arising basis unless the employee chooses to use the remittance basis.

Transition

The transitional provisions apply the amended ITEPA03/s22 and ITEPA03/s26 to general earnings that arose to not ordinarily resident or non-domiciled employees for tax years up to and including 2007-08 as if the individual had made a claim under ITA07/s809B for the remittance basis to apply in those years.

Effect

The effect is that these general earnings will continue to be taxable if and when remitted to the UK after 6 April 2008. Further, in determining whether a remittance has been made, and in what amount, the new rules at Chapter A1 Part 14 ITA07 apply (with some very minor exceptions, for example, for mixed funds).

Republic of Ireland

For years up to and including 2007-08 general earnings from the Republic of Ireland were not regarded as chargeable overseas earnings, and so were taxed on the arising and not the remittance basis.

This transitional provision also therefore provides that earnings from employment in the Republic of Ireland that were taxed on the arising basis in tax years up to and including 2007-08 are not subject to UK tax again as a remittance if remitted after 6 April 2008.

Further information about the identification and taxation of general earnings that were either chargeable overseas earnings or foreign earnings is in the Employment Income Manual (EIM 40301+).