Automatic remittance basis

By Tolley in association with Paul Tew
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The following Employment Tax guidance note by Tolley in association with Paul Tew provides comprehensive and up to date tax information covering:

  • Automatic remittance basis
  • Introduction
  • The general position ― claiming to use the remittance basis
  • The automatic remittance basis
  • Practicalities
  • Exceptions

Introduction

UK resident individuals who are non-UK domiciled can benefit from the remittance basis of taxation. The remittance basis allows for relief from UK taxation for non-UK sources of income which are not brought in (or remitted) to the UK. A remittance is anymoney or other property which is, or which derives from, offshore income and gains which are brought, either directly or indirectly, into the UK for the benefit of an individual. A remittance also includes anymoney or other property which derives from offshore income and gains which are for the benefit of anyother relevant person.

Generally, an individual has to elect for the remittance basis to apply. There are, though, specific situations when the remittance basis applies automatically, and this guidance note considers these provisions, and how they differ from the general position where an election is required.

ITA 2007, s 809B
The general position ― claiming to use the remittance basis

Generally, an individual who is UK-resident but not UK-domiciled for a tax year is taxed on the arising basis unless, when completing their self assessment tax return, they make a claim under ITA 2007, s 809B for the remittance basis to apply.

Claiming the remittance basis allows relief from UK tax on income and gains paid and retained outside the UK. It should be remembered; however, that in most cases, there is a tax ‘cost’ in claiming the remittance basis ― namely the loss of personal allowances and reliefs and the CGT annual exempt amount. That being said, for individuals whose income is of a level whereby the personal allowance is completely removed (£125,000 for tax year 2019/20) and where no UK capital gains arise, this ‘cost’ may not be relevant.

ITA 2007, s 809G; TCGA 1992, s 3(1A)

Longer term UK residents must also pay the

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