Non-UK domiciled individuals who have lived
in the UK for a long time will have to decide whether it
is worthwhile continuing
to claim the remittance basis of tax. From 6
April 2008, an individual who has been resident in the UK for
at least seven years
out of the previous ten will have to pay
a £30,000 charge for each tax year they
wish to use the remittance basis. Periods
before April 2008 will count, so if you have
already been resident in the UK for seven
years, the change will affect you in the
2008/09 tax year.
Under the remittance basis, you pay UK
tax on income arising overseas only when you bring it into
the
UK. Individuals who
are not domiciled in the UK are currently
taxed on the remittance basis on most types
of income. The remittance basis also covers
some income of individuals who are not
ordinarily resident in the UK, and the new
rules will also affect them.
If you have been resident in the UK for
seven years and do not pay the charge, you will be subject
to UK
tax on all your worldwide income and capital gains as they
arise. If you have no overseas capital gains, paying the
charge will
only be worthwhile
if your unremitted income is more than £75,000.
Broad details of how the annual charge is
likely to operate were announced in a consultation
document on 6 December 2007. As part of the reform, people
who use the remittance basis will lose
entitlement to personal tax allowances,
the annual capital gains tax exemption and
some other reliefs. It will be possible to opt
in and out of the remittance basis year by year.
You might be able to prepare for the new
regime by rearranging your financial affairs, although the
government
has also promised
to make it more difficult to avoid tax by
using offshore trusts and companies. If
you decide to give up the remittance basis,
you will only be taxed on income and
gains arising from 6 April 2008. You could
therefore avoid UK tax by disposing of
overseas assets before that date, provided
you leave the proceeds overseas.
Tax planning for non-domiciliaries can be
complex and other changes in the rules
are being made, so professional advice is
essential.
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