Remittance Basis: Appendices: Appendix 1 - Starter for 10: Some Frequently Asked Questions about the remittance basis and the remittance basis charge.
1. Can individuals change their domicile status if they do not want to pay the remittance basis charge?
The changes to the remittance basis do not affect an individual’s domicile status, which is a matter of general, not tax law (refer to RDRM20080).
As a matter of general law, a person who does not have a domicile of origin (or dependency) within the United Kingdom will only become domiciled within the UK if the UK is their permanent home, that is, they intend to remain here indefinitely.
Individuals cannot, and do not need to, change their domicile status purely to ‘avoid’ the remittance basis or the remittance basis charge. Someone who is not domiciled within the UK can choose whether or not they wish to use the remittance basis of taxation.
2. Does everyone who is non-domiciled in the UK have to pay the £30,000 RBC?
No. The charge is only payable where someone wants to use the remittance basis and they are 18 years of age and over with more than £2,000 un-remitted foreign income or gains. It is also only payable by remittance basis users who are tax resident in the UK for the year of the claim and have been resident in at least seven of the previous nine tax years.
Refer to RDRM32210.
3. If individuals claim to use the remittance basis and pay the £30,000 remittance basis charge, do they also have to pay tax on any foreign income or gains remitted to the UK?
Yes, if they make a taxable remittance of any of their foreign income or capital gains that arose or accrued in a year in which they used the remittance basis they will have to pay tax on the amount remitted.
If they remit income or gains that they have ‘nominated’ in order to pay the £30,000 remittance basis charge they will not be due to pay further tax on it. That is because the nominated income or gains have already been subject to tax.
Refer to RDRM32300
However, there are some strict ordering rules that apply to determine what amounts of foreign income and gains are treated as remitted to the UK if nominated income or gains are remitted. This broadly means that nominated foreign income or gains are treated as remitted after any amounts of ‘un-nominated’ foreign income or gains.
Refer to RDRM35100.
4. What happens if individuals choose not to use the remittance basis?
They are taxable on their worldwide income and gains in exactly the same way as any other resident of the UK.
This means that their UK tax liability in respect of their foreign income or gains will be determined using the arising basis instead; that is, in the tax year in which the foreign income arises or the foreign chargeable gains accrue.
5. Is it true that if individuals claim the remittance basis and pay the £30,000 remittance basis charge, they don’t have to tell HMRC anything about their foreign income or gains sources?
No. Individuals have to identify the nominated foreign income and gains in respect of which their nomination is being made. If remitting from ‘mixed funds’ (refer to RDRM35200) they may need to identify the source of all amounts in that mixed fund.
They must also show in their self-assessment return information about any foreign income or gains that are treated as taxable remittances in that tax year.
Also, during the course of an enquiry, HMRC has the right to check further details of offshore income or gains in so far as is necessary to check the completeness and accuracy of the return.
6. If individuals bring in their foreign income or gains to the UK to pay their UK tax liabilities, are these amounts taxable as a remittance as well?
Yes, remittances to pay UK tax liabilities are taxable.
However the remittance basis rules provide that money remitted to pay the £30,000 remittance basis charge will not be taxed as a remittance if it is remitted directly to HMRC from a foreign source.
6(a) If I pay £45,000 to HMRC, representing my remittance basis charge for year one and the first payment on account of the remittance basis charge for year two in one go will the whole amount still be treated as not remitted to the UK under the RBC exemption?
Yes. Payments, including payments on account, will not be treated as a remittance if it is paid directly from foreign income or gains held outside the UK direct to HMRC provided that it relates to years for which the remittance basis charge is payable.
7. How do individuals pay the £30,000 remittance basis charge?
The £30,000 charge is administered and collected through the Self-Assessment system and normal filing and payment dates will apply.
Refer to RDRM32380.
8. Can individuals pay the £30,000 remittance basis charge by way of a restriction in their PAYE tax code?
No, as noted at question 7 above, it has to be paid by way of the Self-Assessment (SA) system.
If someone is liable to the remittance basis charge but does not have an SA record, one will be set up in order to receive SA tax returns and for them to be able to pay the charge.
9. Will individuals who leave the UK part way through the tax year pay a reduced charge in proportion with how long they have been in the country?
No. If they claim the remittance basis in the year of departure and are liable to the remittance basis charge then the full amount of £30,000 is due.
Refer to RDRM32240.
10. If individuals choose the remittance basis are they then ’locked’ into it for life?
No. Individuals who meet the status requirements can choose each year if they want to be assessed on the remittance basis or the arising basis for that year.