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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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Remittance Basis: Accessing the remittance basis: Claiming the remittance basis: Loss of Personal Allowances and the Annual Exempt Amount

One of the consequences of deciding to make a claim under ITA07/s809B to be taxed on the remittance basis is the loss of entitlement to various personal tax allowances (PAs) and the annual exempt amount (AEA) for capital gains tax purposes.

Remittance basis users who are accessing the remittance basis under ITA07/s809D because they are below the £2,000 threshold or ITA07/s809E because they have limited/no income or gains liable to UK tax will retain their PAs and AEA.

Note: In a very small number of cases some remittance basis users may have their allowances restored by virtue of an entitlement under a double taxation agreement refer to RDRM32050 on loss of personal allowances - exceptions for dual residents.

Personal Allowances

The following personal allowances are not available to individuals claiming the remittance basis under section 809B:

  • Personal allowances across all age-bands
  • Blind person’s allowance
  • Tax reductions for married couples and civil partners
  • Relief due for certain payments for life insurance; and to trade and police organisations (ITA07/s457-s459).

Annual Exempt Amount

Individuals claiming the remittance basis under section 809B also lose their entitlement to an annual exempt amount for capital gains tax purposes.

Note: Foreign chargeable gains are only taxed on the remittance basis for non-domiciled (ND) individuals. However remittance basis users who are domiciled within the UK but not ordinarily resident (NOR) still lose their AEA, even though their foreign chargeable gains are not within the remittances regime.

Example 1

Jill is 33, and has been resident in the UK for 3 years. In 2011-12 Jill has UK income from her employment. She also has a foreign chargeable gain on the sale of some property abroad, totalling £62,000, of which she remits only £6,000 in that year.

Jill makes a claim to use the remittance basis under section 809B. She therefore loses her personal allowances (ITA07/s35) and her AEA (TCGA92/s3(1A)).

Note: that Jill loses her personal allowances even though she only has UK income and not foreign income.

Example 2

Jack is 67, and is ND. He has been resident in the UK for 5 years. Jack was registered blind 2 years ago and has received Blind Person’s Allowance (BPA) for the past two tax years.

In 2009-10 Jack has UK income from rental property, and makes an £85,000 capital gain on the sale of some UK assets. His foreign income is £25,000, of which he remits only £5,000 in that year.

Jack makes a claim to use the remittance basis under section 809B. He therefore loses his personal allowances (ITA07/s36) and his AEA (TCGA92/s3(1A)).

Note: that Jack loses his AEA even though he has no foreign chargeable gains.