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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: Exceptions to the claim requirements: Un-remitted foreign income and gains below £2,000 threshold

 

Taxpayers may use the remittance basis without making a formal claim in a tax year if:

  • they are UK resident in that tax year, and
  • they are not domiciled in the UK for that tax year or are not ordinarily UK resident for that tax year, and
  • the amount of their un-remitted foreign income and foreign chargeable gains for that year is less than £2,000, (refer to Note 1) and
  • they do not request a self-assessment tax return (under TMA70/s8), and
  • (for non-doms only) they are not entitled to an exemption from liability to income tax under ITA07/s828A because they are individuals with small amounts of foreign employment income. (refer to Note 2).

Note 1: The reference to foreign chargeable gains is only relevant for individuals who are not domiciled within the UK.

Un-remitted foreign income and foreign chargeable gains

The amount of an individual’s un-remitted foreign income and gains for a tax year is the total amount of their foreign income and gains for that year minus the total amount of those income and gains that are remitted to the UK in that year.

Also refer to RDRM31190 Exchange rates

Self-Assessment returns

Remittance basis users who meet the criteria above and are below the £2,000 threshold do not have to complete a self-assessment Tax Return in order only to claim the remittance basis. This is because for many such remittance basis users their foreign income or gains each year is minimal and they tend not to make taxable remittances so there would be very little else to complete on the return.

Note 2: Non-domiciled individuals with small amounts of foreign employment income may receive an exemption from liability to income tax under ITA07/s828A. refer to RDRM32070Calculation of income tax liability - exemption for non-domiciles with small amounts of foreign employment income. The result is that such individuals are automatically taxed on the arising basis, even though they might meet the remaining criteria to use the remittance basis under ITA07/s809D because they are ‘below the £2,000 threshold’. So if they wish instead to be taxed on the remittance basis they will need to complete a self-assessment return to claim the remittance basis of taxation; this will mean that Condition F of ITA07/s828A is not met.

Refer to RDRM37040 Appendix 4 for a diagrammatic representation of the interaction between ITA07/s828A and ITA07/s809D.

Also, depending on their circumstances individuals may be required to complete a self-assessment return for other purposes, for example if they do make taxable remittances. In such case they may then complete the relevant supplementary pages SA109 Residence, Remittance basis etc. of the return. There is a box to enable them to advise HMRC that they are within and have chosen to use the remittance basis under ITA09/s809D.

For more information about when individuals may need to complete a UK tax return please refer to Self Assessment: The Legal Framework.

Remember

Remittance basis users who are below the £2,000 threshold keep their entitlement to UK personal tax allowances and the Annual Exempt Amount for capital gains (refer to RDRM32040 Loss of personal allowances/Annual Exempt Amount). They are also not liable to the Remittance Basis Charge, regardless of the length of time they have been resident in the UK (refer to RDRM32260 - long term residents and the below £2,000 exception).

Example 1

Jason has been UK resident for 15 years; he remains non-domiciled in the UK.

In 2012-13 Jason has total foreign income and gains of £80,000 for the tax year. During that tax year he brings £78,500 of it to the UK. This money is liable to UK tax upon remittance.

This leaves £1,500 ’un-remitted’ (also refer to RDRM31190 exchange rates). As this is less than the £2,000 threshold he can use the remittance basis without making a claim under ITA09/s809B for the relevant tax year if he so wishes.

He does not lose his personal allowances, or his Annual Exempt Amount. Although he is a long-term resident he is not liable to the Remittance Basis Charge.

However Jason will likely need to complete a self-assessment Tax Return as the £78,500 remittance to the UK will need to be returned.

Example 2

Joachim has an overseas bank account into which is paid various amounts of foreign chargeable earnings, totalling £25,000. He brings most of this to the UK shortly after he earns it. In 2012-13 he spends £1,500 on a holiday in Italy for which he pays the Italian travel agent direct, using his foreign chargeable earnings for that year. At 5 April 2013 Joachim still has £1,750 of his foreign chargeable earnings for 2012-13 that remains in his overseas bank account.

The £1,500 and £1,750 both count towards the £2,000 threshold (s809D) and so Joachim cannot use ITA09/s809D and use the remittance basis without claim in 2012-13.

Money spent overseas must be taken into account when calculating the amount of income and gains not remitted to the UK. also refer to RDRM35400 Offshore transfers.