Unremittable income

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Unremittable income
  • When income cannot be remitted
  • How is a claim made?
  • When is the income taxable?
  • Trading income

Most people in the UK are taxable on their worldwide income on an arising basis. This means that it is taxable when it is paid to the individual or put at his disposal, for instance, by being credited to a bank account.

Dewar v IRC 19 TC 561 (subscription sensitive)

Individuals who are not domiciled in the UK may be able to use the remittance basis of taxation. Broadly speaking, this means that they are only taxed when they bring money, or assets purchased with the money, to the UK. For more background on these terms, see the Domicile and Remittance basis ― overview guidance notes.

Prior to the 2013/14 tax year, if the individual was UK resident and domiciled but not ordinarily resident in the UK, he could also access the remittance basis. Although this concept was abolished from 6 April 2013, under transitional rules the taxpayer might still have been able to continue to access the remittance basis in 2013/14 to 2015/16 under transitional rules. See the Ordinary residence ― transitional rules (2013/14 to 2015/16) guidance note.

In some situations an individual taxed on the arising basis may receive money overseas, for instance, by crediting a bank account or selling a chargeable asset, but is unable to move the money to the UK and spend it.

As it would be unfair to tax individuals on money they cannot access, the legislation allows a claim to be made to delay the tax charge until the restriction on moving the money is lifted.

The rules are slightly different for income and for gains. This guidance note deals with unremittable income. For gains, see Tolley’s Capital Gains Tax 2017/18 Chapter 49.6 (subscription sensitive).

Note that the rules for ‘unremittable’ income are not to be confused or connected with the remittance basis rules, despite the similar names.


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