There has been much publicity and comment about “non doms” – these being persons who whilst resident in the UK are not domiciled there (see here for more information on what this means).

The popular belief is that these people are unfairly avoiding tax on income or capital gains made outside the UK by claiming “non domicile” status. This means that any income or gains they make outside of the UK are not taxed unless the money is remitted into the UK.

The UK government has therefore decided to introduce new rules, which means that any non-domiciled person who has been resident in the UK for at least seven out of the last 10 years (on a rolling basis) and who wants to claim non domicile tax status now has to pay an annual charge of £30,000.

The rules are complex and made more so when you consider that the income or gain may very well have already been taxed in another country which may or may not have a double taxation agreement with the UK. However here is a very brief summary of the position for 2008/09:

  1. If you are an adult caught by the ‘years of residence’ rule, and your unremitted foreign income or gains exceeds £2,000, you will have to make a choice of whether to include them in your self-assessment return for 2008/09 and pay UK tax or pay the £30,000 tax charge. The decision is made when you complete your 2009 Tax Return, and the tax will be payable as 2008/09 tax.
  2. You may be able to claim credit for the UK tax/£30,000 against your liability elsewhere in the world, and against the UK liability when the income or gains are eventually remitted. This is a particularly complex area for many people.
  3. The concept of what constitutes a remittance has been clarified. Tax will be due on the remittance to the UK by close family members of income or gains gifted by you to them outside the UK, and on the import of assets bought outside the UK using untaxed income or gains (subject to limited exemptions).
  4. Key to managing your tax liabilities is the ability to identify and track capital, income and gains. People affected should seek advice on keeping different types of funds separate, how to remit ‘clean’ and ‘tax-paid’ income and gains, and on how money brought into the UK from mixed funds will be taxed. If you mix clean or tax-paid income with non tax-paid you will end up being liable to tax on the whole lot!

If you feel you will be affected by these new rules you should seek appropriate professional advice from a tax advisor or contact James Green & Co. for further information.

See Also:

What is the Difference Between Domicile and Residence?

Domicile – Having Your Cake and Eating It

Category: Taxation

2 Responses to “The Remittance Basis of UK Taxation: What it Means for Persons Entitled to Claim Non Domicile Status”

  1. Stew G says:

    Great, I never knew this, thanks.

  2. NickoGee says:

    Thanks for this explanation. It makes sense now.

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