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Technical Connection

Tony Wickenden Tax Planning

Over the past couple of weeks I have had occasion to refresh my understanding (or should I say attempt to refresh my understanding) of the rules on UK resident non- domiciliaries and the remittance basis of taxation (of foreign gains and income) and what, if any, structures and investments might be “tax appropriate” for this particular class of UK taxpayer. 

In the “old” (pre April 2008) days UK resident non-domiciliaries could access the remittance basis of taxation for their foreign gains and income (and earnings from foreign employment) without payment.  This represented , in effect, a  “free gift” from HMRC as a reward for living in the UK , paying tax on UK source income and, hopefully, spending the net receipts of such UK source income (and gains) in the UK to benefit our economy.

There had been a long-standing simmering pressure cooker (if such things do indeed “simmer”- I’m not sure, never having owned one) of demand for change – and even “official” consideration of it.  Well, staying with the culinary analogy, things “boiled over” in the 2008 Budget and Finance Act.  However, the spillage and subsequent damage to the pristine granite worktop of non-domiciliary tax treatment   (too far with the kitchen related stuff? … maybe) was not quite as bad as it might have been. As it turns out , the price for retaining an untouched shiny (or matt) workshop (sorry, couldn’t resist it ) is a £30,000 annual fee.

So, how do these  new(ish) provisions work  and , without using the “f” word , (quite difficult I would imagine for those affected and who have a working knowledge of expletives in the English language) how do affected “non-doms” feel and what, if anything, can they do about them?

Basically, since 2008 UK resident non-domiciled investors can (subject to  certain important exceptions) access the remittance basis of taxation on foreign source income and capital gains through paying a yearly £30,000 remittance basis charge (RBC)  to UK HMRC.

Before considering how the £30,000 RBC can be avoided ,  we need to consider

–           some important conditions for claiming the remittance basis

–           situations where the remittance basis is available without a claim being made

–           situations where the remittance basis is available without the need to pay the charge


(i)        When the remittance basis is available  without charge and without claim


(a)           Regardless of the individual’s age and length of residence in the UK, provided non-UK income and gains are less than £2,000 for the tax year in question –

in these circumstances the personal allowance and annual CGT exemption will also be available.

(b)          The individual is either under 18 for the whole year or has been resident in the UK for less than 7 of the previous 9 tax years (10, including the year in question) and has no other UK income and gains and has not made any remittances whatsoever in to the UK in that year – in these circumstances (ie. those stated in this sub- section (b), the personal allowance and the annual CGT exemption will NOT be available.

For all other cases a claim for the remittance basis must be made – although there are cases where, despite a claim being necessary, the £30,000 RBC will not be payable – see (ii) immediately below. 


(ii)          When the remittance basis is available without charge ie. no £30,000 RBC payable (but claim necessary)


(a)          Short-term residents

Individuals who have been resident in fewer than 7 out of the 9 previous tax years (and who do not fulfil the “no other UK income/no remittance” test – see (i)(b) above – or the de minimis test in (1) (a) above) have to claim the remittance basis BUT are exempt from paying the £30,000 RBC – no personal allowance or annual CGT exemption is available.

(b)          Minors

Individuals under the age of 18 (and not qualifying for either of the exemption(s) (i)(a) and (i)(b) above) are not required to pay the charge but a claim will need to be made  –  no personal allowance or annual CGT exemption is available.


(iii)         When the remittance basis is available subject to the payment of the £30,000 RBC


All other “non-doms” qualify for the remittance basis ie. most adult “long-term residents” with income over the de minimis level, but subject to the payment of the £30,000 RBC – neither the personal allowance nor the annual CGT exemption will be available.

Just to remind you, the consequences of the remittance basis for a UK resident “non-dom” are that

– no personal allowance or annual CGT exemption (subject to the exception in (i) (a) above) will be available and

– no tax will be due on an arising basis on all foreign employment and investment income and (for non-domiciliaries only ie. NOT UK domiciled non-ordinarily residents) foreign capital gains

It should be mentioned at this point that chargeable event gains under offshore bonds are always assessed on the arising basis .  The remittance basis cannot apply to such gains regardless of the policyholder being entitled to the remittance basis. I will look next week at ways in which foreign income and gains can be deferred without the need to pay the £30,000 remittance basis charge.


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