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Taxation of Non Doms – increased cost of claiming the remittance basis

The Chancellor announced yesterday that the annual charge paid by non UK domiciled individuals to access the remittance basis of taxation will be increased for long term UK residents.

The remittance basis of taxation is available to non UK domiciled individuals so that they are only taxable on their UK source income and capital gains and on foreign income and gains only when they are brought  in or ‘remitted’  to the UK.

The remittance basis charge (RBC) was first introduced in April 2008 and has been set at £30,000 for those resident in the UK for 7 out of the previous 9 tax years since then.  April 2012 saw the introduction of a higher RBC for those resident for 12 out of the last 14 tax years of £50,000.

The charge will now be increased for those resident for 12 out of the last 14 years from £50,000 to £60,000. In addition, a new charge will be introduced for UK residents who have been resident in the UK for 17 out of the last 20 years of £90,000.

The election to claim the remittance basis is currently an annual election and is useful in so far as it enables the non domiciled taxpayer to organise their affairs in a tax efficient manner.  The Government have announced that they will consult on whether the making of the election should apply for a minimum of 3 years. Watch this space.

The tipping point – when is it still worthwhile to claim the RBC?

Generally, non UK domiciled individuals will pay the RBC if it is cost effective to do so.  There could be other reasons for paying the RBC, including administrative costs of disclosing worldwide income and gains or confidentiality.

Currently, the amount of foreign income and capital gains that would warrant the RBC to be cost effective are as follows:       

£30,000 £67,000 income

£107,000 gains

£50,000

£111,000 income

£180,000 gains

The increased RBC means that the tipping points will be broadly as follows:

£60,000

£133,000 income

£214,000 gains

£90,000

£200,000 income

£321,000 gains

The non UK domiciled individual will need to seriously consider the tax cost of claiming the remittance basis going forward. However, it should be noted that it would appear that the RBC can still be paid directly to HMRC from foreign income or gains and not constitute a remittance.

If you would like to discuss how these changes may affect you, please get in touch.

 

 

Date: 4th December, 2014
Author: Suzanne Briggs

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