Remittance basis: exemptions: remittance basis charge - repayment by HMRC
There may be some exceptional circumstances where the £30,000 or the £50,000 remittance basis charge is paid to HMRC but then is later repaid, or is otherwise no longer due.
Any foreign income or gains remitted to pay the charge and initially covered by the exemption at ITA07/s809V will be regarded as a remittance when the charge is withdrawn and so will be treated as liable to UK tax at that point (ITA07/s809V(2)).
Change of claim
The £30,000 or £50,000 remittance basis charge is most likely to be withdrawn where an individual, having made a claim for the remittance basis and paid the charge for that year, subsequently decides not to claim the remittance basis for that year and makes an amendment to their Self Assessment return (TMA1970/s9ZA). In such circumstances ITA07/s809H will not apply for that tax year, so the exemption cannot apply either.
Change of status
The other situation where the £30,000 or £50,000 is likely to be withdrawn or not otherwise due is where it later transpires an individual has claimed the remittance basis for a tax year but was not entitled to do so as they were UK domiciled and ordinarily resident in the UK in that year.
If the exemption under section 809V was claimed, the foreign income or gains used to pay the remittance basis charge will not have been subject to tax in the year in which they arose/accrued because the individual used the remittance basis in that year. Due to the exemption the income or gains will also not have been subject to tax when brought into the UK. In such situations there are two possibilities:
- the £30,000 or £50,000 payment was made from foreign income or gains from an earlier year in which the individual was entitled to claim the remittance basis and did so. The £30,000 or £50,000 is treated as a taxable remittance and will be taxable in the year in which the remittance to HMRC occurred
- the £30,000 or £50,000 payment was made from foreign income or gains from the present year or an earlier year in which the individual was not entitled to claim the remittance basis. The income or gains will be taxed on the arising basis for the year in which the foreign income or gains actually arose. If the return cannot be amended you may need to deal with such assessments under the ‘discovery provisions’ at TMA70/s29.
In the example in RDRM34020 above, Alex’s circumstances change and he decides not to claim to be taxed on the remittance basis for 2009-10. His liability for 2009-10 on the arising basis is £195,000.
When Alex made the payment on account of £40,000 in July 2009 he anticipated that £30,000 of it would be attributed to the remittance basis charge. In the event he did not claim to be taxed on the remittance basis. He does not have to pay the remittance basis charge.
None of the payments on account can therefore be attributed to the remittance basis charge and the £40,000 that Alex paid from his 2008-09 foreign income (remember that Alex did use the remittance basis in 2008-09) in July 2009 is a taxable remittance.
Any cases of difficulty should be referred to Specialist PT, Personal Tax International - Advisory, Foreign Income and Remittance Basis Team.
Note - Finance Act 2013 introduced section 809UA ITA 2007 for the years 2012-13 onwards. This legislation allows payments on account made in anticipation of a claim to the remittance basis to continue to be treated as not remitted if no claim to the remittance basis is subsequently made provided an amount equivalent to the foreign income and gains paid directly to HMRC is taken offshore.