Remittance basis: accessing the remittance basis: remittance basis charge - nomination of foreign income and gains: example - insufficient nomination
Isabella is a non-domiciled long-term UK resident who has claimed the remittance basis for 2010-11. She has £80,000 of UK employment income, and her un-remitted foreign income and foreign gains for the year are as follows:
|Relevant foreign income - bank interest||£45,000|
|Foreign employment income||£5,000|
|Foreign capital gains||£190,000|
Isabella pays tax at a 40% tax rate on her nominated income and 18% on her nominated foreign gain. Nominated income and gains are taxed as if the remittance basis did not apply to them (ITA07/s809H(2)). Isabella chooses to nominate £35,000 of her foreign gains, and £40,000 of her bank interest (RFI), which creates a relevant tax increase of only £22,300
Under section 809H(4) a further £19,2501 of foreign income is treated as having been nominated, to create a further £7,700 of income tax due.
|Calculation (a)||Calculation (b)|
|40% on nominated RFI||£40,000||=||£16,000|
|40% (2) on foreign income(1) nominated under s809H(4)||£19,250||=||£7,700|
|18% on nominated CG (4)||£35,000||=||£6,300|
|Total Income Tax and CGT Due||£55,040 (3)||£25,040 (3)|
|Relevant Tax Increase **||is||Total (a)||£55,040|
- Section 809H(4) only allows an amount to be treated as foreign income, not capital gains, regardless of whether the individual has sufficient income to have made such a nomination. The actual composition of their offshore portfolio or their own nominations is irrelevant.
- Income merely treated as nominated will be taxed at the prevailing higher rate for employment/savings income, but it is not necessary to determine its precise nature.
- As a remittance basis user, Isabella has no personal allowances due.
- Rates used here for the purposes of this example only; use the rates applying in the relevant tax year.
Also refer to RDRM35100: remittances of nominated income or gains for details about the rules that may apply if Isabella remits any of her nominated income or gains in later years