The Remittance Basis

The remittance basis is available if an individual is not domiciled in the UK, but still his overseas income and capital gains will be taxed.

The overseas income will be taxed only if its brought to the UK.

What is Domicile?

A person gets a domicile when he is both, residential and national of a country. It has three types:

·         Domicile of Origin (i.e. By birth)

·         Domicile by choice (i.e. After getting mature, a person chooses his own domicile)

·         Domicile of dependency (which a person gets through his parents)

What is residency?

·         Automatic residency:

An individual gets an automatic residency if he lives:

1.       183 days in UK in a single tax year.

2.       30 days in a tax year, if his only home is in the UK.

3.       365 days continuously.

·         Residency through ties:

If an individual does not fall into the category of automatic residency rules then following factors can be considered if

1.       An individual has family in the UK

2.       A house is available in the UK for at least 91 days.

3.       An individual has worked in the UK for at least 40 days.

4.       An individual has spent more than 90 days in the UK.

5.       An individual has spent more time in the UK than in any other country.

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If an individual is not a UK resident  then tax will not be charged on overseas income regardless of whether or not a person has domicile status.

If an individual is UK resident than tax will be charged on worldwide income, i.e. both UK and overseas income.

However, if an individual is not domiciled in the UK then remittance basis is available.

What is the meaning of Remittance?

 

·         To bring money (overseas income)  to the UK.

·         To bring assets purchased from overseas income  to the UK except:

1.       Assets’ price is less than 1000 pounds

2.       Personal belongings

3.       For exhibition purposes

4.       For repair purpose.

·         To pay a loan in the UK with that overseas income

An auto remittance basis will be applied  if unremitted income and gain is less than 2000pounds per year.

If unremitted income is more than 2000 pounds per year than remittance basis will need to be claimed/opted.

Remittance base charge:

For claiming the remittance basis over arising basis, the age of the individual should be more than 18 years.

1.       If an individual has lived for 7 years in the UK in the last 9 years, then a fixed amount of 30,000 pounds will be required to pay.

2.       If an individual has lived for 12 years in the UK in the last 14 years, then a fixed amount of 50,000 pounds will be required to pay.

However, if an individual does not meet the above criteria, then Remittance basis can not be opted.

Once remittance basis is opted then:

·         There will be no personal allowance on both overseas and UK income

·         No Annual exemption

·         No relief will be given for expenses incurred on travelling and subsistence of an individual and his family

·         100% overseas pension income will be taxed.

·         Ordinary dividend will be taxed at 20%, 40% and 45% instead of 10%, 32.5% and 37.5%

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