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August 15, 2013
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HMRC “Nudge” to Remittance Basis Users

HM Revenue & Customs (HMRC) have confirmed that they are to write to all UK tax residents that claimed the remittance basis in their 2011/12 tax returns.

The remittance basis is available to UK residents that are non UK domiciled and allows the taxpayer to pay UK income tax and capital gains tax only on foreign income and gains that are remitted to the UK (in comparison the normal rule is that a UK resident is liable to tax on their worldwide income and gains).

Prior to 6 April 2013 the remittance basis was also available to UK domiciled taxpayers provided they were non ordinarily resident in the UK.  However, the concept of ordinary residence was abolished most tax purposes in the Finance Act 2013.

This letter is being described as a 'nudge', because HMRC believe that many taxpayers have got it wrong in the past when it comes to identifying all remittances when completing tax returns.

Therefore HMRC’s stated logic for the letter is to educate non-domiciles about the various guises that a remittance can take.  This should therefore reduce the need for tax enquiries.

Examples of remittances include :-

-          Transfers of money to the UK

-           Assets transferred to the UK

-          Settlement for services provided to the taxpayer in the UK

-          Using a UK credit card, or utilising a foreign credit card in the UK

-          Taking out offshore loans to fund UK .. assets, living or services

-          Transfers of monies/assets to the UK, involving gifting to and from other people

-          Exchanges of the use of overseas assets with UK assets

However, what is and isn’t a remittance is a difficult area and any non-domiciles utilising the basis should take tax advice in relation to any transactions where any of their overseas assets, monies, debts, services etc start to interact with the UK.

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