UK resident individuals, who are not UK domiciled or deemed domiciled, may be assessed to tax in the UK on the arising basis or may elect to claim the remittance basis.
Under the arising basis, the taxpayer’s worldwide income and gains are within the scope of UK income tax and capital gains tax.
Depending on the individual circumstances, the remittance basis may a better option. A taxpayer who made the remittance basis election on their tax return is subject to UK income tax and capital gains tax on their UK income and gains, as well as on any taxable remittances made to the UK.
Commonly, a taxable remittance will be a direct transfer of foreign income or gains to the UK but it doesn’t stop there. Here we look at examples of less obvious taxable remittances:
- Withdrawing money from an offshore bank account containing foreign income or gains and using the money in the UK.
- Having foreign income or gains, e.g. rental income, dividends etc. paid directly to a UK bank account.
- Settling foreign income or gains into an offshore trust and the trustee bringing the money to the UK.
- Purchasing a UK asset (including UK shares/bonds) with foreign income or gains.
- Bringing to the UK an asset purchased abroad with foreign income or gains (exemptions apply).
- Booking flights, trains, etc. using foreign income or gains to travel between the UK and a foreign country.
- Paying for any services received in the UK with foreign income or gains, even if those funds are transferred to the payee’s foreign account.
- Using a foreign credit card in the UK or a UK credit card (in the UK or abroad) and settling the credit card bill using offshore income or gains.
- Taking out an offshore loan, the money being used in the UK (e.g. to cover living costs or to buy an asset), and repaying the loan from foreign income or gains.
- Giving foreign income or gains to your spouse, civil partner (or someone you live with as if you were spouses or civil partners), minor child or minor grandchild, and that person then enjoys the money in the UK.
- Giving foreign income or gains to someone abroad, who then brings it to the UK and makes it available for you to use.
The above list is not exhaustive and is meant to illustrate that there are many different ways whereby remittances may happen. If you think any of it may apply to you, or are unsure whether you have made a remittance, feel free to contact any of our advisors.
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.