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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

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HM Revenue & Customs
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Remittance Basis: Accessing the remittance basis: Claiming the remittance basis: Loss of Personal Allowances - exceptions for dual residents

An individual is dual resident if they are resident in the UK under its domestic law and resident in another country under its law.

Where it is possible for individuals to be resident both in the UK and in another country or countries in a tax year; we look to the provisions of existing Double Taxation Agreements (DTAs) to determine in which country the individual is resident for treaty purposes, that is, a person may be resident in the UK but ‘treaty resident’ elsewhere.

These individuals will need to consider the financial implications and decide if a claim for the remittance basis is preferable to being taxed on the arising basis and claiming double taxation relief.

Dual residents who claim the remittance basis under ITA07/s809B lose their entitlement to UK personal allowances and the annual exempt amount (AEA) under ITA07/s809G in the same way as other remittance basis users.

However in certain circumstances it is possible under the terms of some DTAs for non-residents to claim personal allowances. This can occur where the individual is resident in both the UK and another country and under the provisions of the DTAs with that country is treated as ‘resident’ in the other country (‘treaty resident’) and so ‘not resident’ in the UK. The countries where this can happen are:

Austria, Barbados, Belgium, Fiji, *France, **Germany, Ireland, Kenya, Luxembourg, Mauritius, Namibia, Netherlands, Portugal, Swaziland, Sweden, Switzerland and Zambia

Please Note: If an individual is resident, but not a national of Austria, Belgium,*France, \*Germany, Kenya, Luxembourg, Mauritius, **Netherlands, Portugal, Sweden, Switzerland or Zambia, they are not entitled to personal allowances if their UK income consists solely of dividends, interest or royalties of any combination of them.

[Note:

*France - to 5 April 2010 only

**Germany - to 5 April 2011 only

***Netherlands - from 6 April 2011 personal allowances are given to a resident of the Netherlands irrespective of their UK income]

However, whether such dual residents can also claim the remittance basis of taxation will depend on their personal circumstances and the terms of the DTA. For the vast majority it will simply not be beneficial to claim the remittance basis.

So in reality very few individuals can claim the remittance basis and still benefit from UK personal allowances. For example, it is technically possible for someone who is dual resident in the UK and Fiji to make such a claim but there are unlikely to be many such claims in a year.

It is not possible to list all the variations here, as the effects depend on reference to the particular treaty provisions that apply to the particular individual circumstances. Further details on DTA tie-breakers can be found at INTM154020. The terms of the relevant DTAs can be found in the Double Taxation Relief Manual. A summary on the DTAs can be found in the DT digest on the HMRC website.