Since 2008, the Government has imposed a cost on non-UK domiciliaries (non-doms) claiming the remittance basis. Although the annual levy has recently increased, a measure of simplification and some further reliefs are also being introduced, giving a more positive message about the UK as a place to do business.
The remittance basis charge
Most of the UK resident non-doms who use the remittance basis already lose their tax-free personal allowances. In addition, a charge of £30,000 is levied on those who have been UK resident for seven of the previous nine years. From 6 April 2012 a higher remittance basis charge of £50,000 applies to those who have been resident for 12 of the previous 14 tax years. A non-dom can still choose to be taxed on a worldwide basis instead.
A simplification
Since 2008 a non-dom who pays the remittance basis charge has had to 'nominate' some income or gains each year to which the charge is deemed to attach. This was administratively time-consuming and the nominated income or gains has had to be ring-fenced, as there could be disastrous consequences if the nominated amount was remitted, even accidentally. From 2012/13, a non-dom can ensure they do not fall foul of these consequences by nominating £10 or less of income or gains because the tax consequences of remitting nominated income/gains up to £10 will be ignored.
Encouraging non-doms to invest in the UK
From 6 April 2012, a non-dom will be able to remit offshore income and gains to the UK without triggering a tax charge provided a qualifying investment is made in a UK business. This presents an opportunity to make commercial use of offshore resources in the UK. HMRC intends to provide a clearance procedure to confirm that a proposed investment will qualify. The investment may attract existing reliefs such as EIS. For more information download our briefing note –Remitting funds for business relief.
Exchange rate fluctuations
Gains and losses arising from exchange rate fluctuations in foreign currency bank accounts no longer have to be calculated from 6 April 2012.
Sale of assets in the UK
When an asset purchased with foreign income or gains is brought to the UK there is a remittance. Certain assets are ignored, being jewellery and watches for personal use, clothing and footwear, a work of art or antique brought to the UK to be displayed in public, an item in the UK temporarily or for repair, and any item valued at less than £1,000.
However, should those items be sold in the UK the proceeds have previously been treated as remitted. This has acted as a disincentive for those wishing to sell assets in the UK. Following representations from UK auction houses etc., from 5 April 2012 such items may be sold to an unconnected third party in the UK without incurring a tax liability provided the proceeds are removed from the UK, or invested in a qualifying UK business, within 45 days of the proceeds being released.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.