View the related Tax Guidance about Remittance
Automatic remittance basis
Automatic remittance basisSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Before reading this note, it is recommended that you read the Remittance basis ― overview guidance note to familiarise yourself with the wider remittance basis regime.Most individuals who choose to use the remittance basis have to make a claim under ITA 2007, s 809B. See the Remittance basis ― formal claim guidance note.However, in three cases, the remittance basis is given automatically. These are where, in relation to a given tax year, the individual meets any of the following tests:•they have unremitted foreign income and gains totalling less than £2,000•they are under 18 at the end of the year, have no more than £100 of UK taxed investment income, and no other UK taxable income, and do not remit any relevant income or gains to the UK *•they have been resident in the UK for not more than six out of the last nine years, have no more than £100 of UK taxed investment income, no other UK taxable income, and do not remit any relevant income or gains to the UK ** Note that these latter two
Payment of the remittance basis charge
Payment of the remittance basis chargeSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. This means that the remittance basis charge will not apply from 2025/26 onwards. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Remittance basis chargeThe remittance basis charge is an annual charge payable by ‘long-term’ UK residents for the privilege of claiming the remittance basis.Taxpayers who wish to utilise the remittance basis (but do not qualify for it automatically) must pay one of the following charges:•£30,000 per year where the taxpayer has been resident in the UK for at least seven out of the last nine years•£60,000 per year once the taxpayer has been resident in the UK for at least 12 out of the last 14 tax yearsITA 2007, s 809CThe remittance basis is discussed in the Remittance basis ― overview guidance note and the remittance basis charge is covered in the Remittance basis ― formal claim guidance note.The Payment of tax due under self assessment guidance note discusses the various options available to the taxpayer to pay their self assessment tax liability.The remittance basis charge is part of that self assessment tax liability, but is worth considering separately, as payment of the charge
Remittance basis ― overview with employment focus
Remittance basis ― overview with employment focusSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Key points•provided certain conditions are met, Overseas Workday Relief (OWR) can be an extremely valuable form of tax relief for non-domiciled individuals who perform employment duties both in the UK and overseas•OWR is only available in the tax year of arrival and subsequent two tax years following a three year period of non-residence•OWR is generally calculated by reference to the percentage of days an individual spends working overseas•a bank account which qualifies for the special mixed fund rules allows for all offshore transfers to be treated as one single transfer for the year and all remittances as one single remittanceIntroduction ― the remittance basisThe default position for employees who are resident in the UK for tax purposes is that they are chargeable to income tax on their worldwide income and gains. Where an individual is not domiciled in the UK, they may be eligible to claim the remittance basis of taxation. For an individual who has been UK resident for a number of years, there are additional rules which may deem them to
Remittance basis ― nomination, charge and payment
Remittance basis ― nomination, charge and paymentSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.The Remittance basis ― formal claim guidance note explains who can make an election for the remittance basis, and the consequences of making the election. You are advised to read that guidance note first.This note covers the machinery of the remittance basis charge (also referred to as the RBC), including nomination and payment.An outline of the remittance basis can be found in the Remittance basis ― overview guidance note. A discussion of what is meant by a remittance can be found in the When are income and gains remitted? guidance note.Remittance basis chargeIndividuals who have been resident in the UK for at least seven out of the previous nine tax years and who are over the age of 18 have to pay an annual charge to use the remittance basis. These are known as long-term residents. The amount of the charge depends on the length of time the individual has been resident in the UK:Period of UK residenceTax years in forceAmount of remittance basis charge per tax yearAt
NIC settlements for inbound employees with UK employer
NIC settlements for inbound employees with UK employerHMRC offers two arrangements that relax the strict PAYE procedures in respect of NIC. One of these is the modified NIC arrangement covering inbound employees who are ordinarily resident and domiciled outside the UK, but who have been sent to work with a UK employer or host employer, known as an ‘EP Appendix 7A ― Modified Class 1 and Class 1A National Insurance contributions for expatriate employees subject to an EP Appendix 6 agreement’ (EP APP 7A). The EP APP 7A application form for employers to complete who operate a tax equalisation agreement for employees coming to work in the UK from abroad is available at PAYE82003.Scope of agreementAs the name suggests, this arrangement can only apply to employees who are included in an EP Appendix 6 Modified PAYE agreement. This means that in order for an EP Appendix 7A agreement to apply the employee must be a foreign national assigned to the UK who is tax equalised (see the Tax equalisation guidance note) and has an employer or host employer in the UK liable for secondary UK NIC. Unlike with tax, the employer can, but is under no legal obligation to, pay the employee’s primary Class 1 NIC liability as part of the equalisation process. If the employer bears the cost of the employee’s NIC, this should be calculated on a grossed-up basis. HMRC provides information and an example on making settlements with grossed up NIC in COG908060.Many such employees remain
Non-domiciled and deemed domiciled beneficiaries
Non-domiciled and deemed domiciled beneficiariesIntroductionThe current tax position of non-domiciled and deemed domiciled beneficiaries of non-resident trusts is a complex landscape mapped by successive changes in the law. Before 2008, UK resident but non-domiciled beneficiaries were protected by a cost-free remittance basis option for income tax and, like non-domiciled settlors, they were exempt from attribution of capital gains within the trust. Major changes in 2008, 2017 and 2018 have incrementally brought non-domiciles into the regime under which UK domiciled beneficiaries of non-resident trusts are taxed.Changes introduced in 2008 scaled down some of the advantages of long-term non-domiciled status. The remittance basis charge was introduced to impose a cost on accessing the benefits of the remittance basis. See the Remittance basis ― overview guidance note in the Personal Tax module. At the same time, changes were made to the taxation of non-domiciled beneficiaries of non-resident trusts to bring their benefits from the trust within the scope of capital gains tax.Notwithstanding the imposition of a charge for the use of the remittance basis, public and political opinion continued to oppose the non-domiciled advantage. As a result, Finance (No 2) Act 2017 introduced the concept of deemed domicile for income tax and capital gains tax for the first time. Long-term residents of the UK, and those who were originally UK domiciled, can no longer benefit indefinitely from the remittance basis. Once they satisfy the conditions for deemed domicile, they become taxable on their worldwide income and gains.In conjunction with the introduction of
File management
File managementWhilst administering an estate it is extremely important to be able to locate all documents and correspondence received, make sure deadlines are recorded and met, and to know what stage you are at all times. The beneficiaries should be kept informed and updated regularly.Keeping track of documents and correspondenceThe administration of an estate can generate a huge amount of documentation. Obviously, the amount of paperwork varies according to the complexity and range of assets, liabilities and beneficiaries. Nevertheless it is advisable to adopt a consistent outline structure for record keeping which can be applied to each estate.Unless the estate is very simple, it is not advisable to simply file documents and correspondence in date order. You will need to refer to documents throughout the administration, and they will become increasingly difficult to find if the file is not organised in a segmented way. The aim is to keep all the documents on a particular asset or liability together, so that the ‘story’ for each asset etc. is quickly ascertained at any point, particularly when it comes to preparing the estate accounts.See the Table ― probate file index for a suggested file structure.There are some advantages to a chronological file, and practitioners may be reluctant to abandon such a system if that is what they use with their other paper files. If so, it is recommended that both a chronological file and a subject segmented file is kept with duplicates of essential documents such as valuation letters, remittance advices,
Introduction to capital gains tax
Introduction to capital gains taxIn general terms, a charge to capital gains tax arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a profit (known as a gain) or a loss.See Checklist ― calculation of capital gains and losses for issues to consider when reporting client gains and losses.At Spring Budget 2024 the Chancellor announced a change to the rates of CGT for disposals of residential property. From 6 April 2024, the higher rate for gains from residential property are reduced to 24% from 28% so that such gains are taxed at a rate of 18% to the extent that they do not exceed the individual’s unused basic rate band and at 24% to the extent that they exceed the amount of the basic rate band. The rates for carried interest remain 18% and 28%. Chargeable personA chargeable person could be an individual, a trustee, a personal representative or a company, although companies are subject to corporation tax on chargeable gains not capital gains tax. For further discussion, see CG10700 and Simon’s Taxes C1.102. Exempt persons include, amongst others, charities (so long as the gain is applicable and applied for charitable purposes) and local authorities. See CG10760P.Generally, if an individual is resident in the UK in the tax year they are chargeable to tax on capital gains arising in that tax year. See ‘Overseas aspects’ below for a discussion on the taxation of gains on non-resident individuals and those accessing the
Remittance basis and foreign currency bank accounts
Remittance basis and foreign currency bank accountsForeign currency bank accounts are central to the operation of the remittance basis. See in particular the Remittance basis - setting up foreign accounts guidance note, but also the Remittance basis - mixed funds and When are income and gains remitted? guidance notes.Fundamental change to foreign exchange gains from 6 April 2012From 6 April 2012 foreign currency gains or losses made by individuals, trustees and personal representatives on the withdrawal of funds from foreign bank accounts are exempt for capital gains tax purposes. Generally speaking, this is welcome news for taxpayers and their advisers since:•gains on foreign currency accounts will not be taxed, and•the complexities of the previous regime have been swept awayHowever, if there is a loss on foreign currency, then there is no relief for that loss.See Example 1.Rules for tax years up to and including 2011/12The remainder of this guidance note discusses the position in tax years 6 April 2008 to 5 April 2012.For the purposes of the other remittance basis notes in TolleyGuidance, it was assumed for simplicity that there were no foreign exchange (FX) differences to be taken into account. In reality this is not the case. Some key issues relating to FX on foreign currency bank accounts in the tax years from 6 April 2008 to 5 April 2012 are covered below.Important note regarding links to legislationThe legislative links in these rest of this guidance note are for reference
Determining residence status (2013/14 onwards)
Determining residence status (2013/14 onwards)IntroductionResidence is one of the key factors you should consider when deciding whether, or to what extent, an individual is liable to tax in the UK. The other key factor is domicile.Residence refers to the individual’s tax status on a year by year basis and domicile is the place which a person regards as their true home. See the Domicile guidance note.This guidance note explains the statutory residence test (also known as the SRT), which applies from 6 April 2013. It applies for income tax, capital gains tax, inheritance tax and corporation tax (to the extent that the residence status of individuals is relevant to the latter two taxes). The statutory residence test is not used for national insurance purposes.For the implications of residence status on UK taxation, see the Residence ― overview guidance note.If the individual comes to the UK or leaves the UK but is classed as resident in that tax year under the statutory residence test, it may be possible to split the tax year into periods of UK residence and non-residence. For a discussion of split year treatment, see the Residence ― issues on coming to the UK (2013/14 onwards) and Residence ― issues on leaving the UK (2013/14 onwards) guidance notes.Residence is also discussed in detail in Simon’s Taxes Division E6.1. You may also find Tolley’s Statutory Residence Test useful.HMRC online indicatorHMRC has published an online tool that gives an ‘indicator’ of an individual’s residence position. The link to this
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