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September 24, 2021

Nudge Nudge - HMRC Send Nudge Letters to Non-Domiciles Regarding Unpaid Tax

HMRC has recently sent out hundreds of letters to individuals with a non-domiciled status ("non-doms") who they believe may not have declared the correct income/gains on their tax returns, or failed to pay the remittance basis charge.

Non-Doms and the Remittance Basis 

Domicile is a common law concept that refers to the country that a person treats as their permanent home, or has a substantial connection with. Non-dom therefore refers to an individual who is domiciled outside of the UK.

Where an individual is UK tax resident in a given tax year, then in the absence of any reliefs or elections, they will be subject to tax in the UK on their worldwide income. However, for UK tax resident non-dom individuals there this the option to claim for foreign income/gains to be taxed under the remittance basis.

Under the remittance basis, the individual's income/gains would only be taxed in the UK if it is brought in to the UK, or used or enjoyed in the UK. If it is kept offshore, it is free of UK tax.

However, there is a charge to claim the remittance basis where an individual has been tax resident in the UK for a number of years as follows:

  • £30,000 for non-domiciled individuals who have been resident in the UK for at least 7 of the previous 9 tax years immediately before the relevant tax year
  • £60,000 for non-domiciled individuals who have been resident in the UK for at least 12 of the previous 14 tax years immediately before the relevant tax year

Where an individual is UK tax resident for at least 15 out of the previous 20 years, they would be deemed to be domiciled in the UK and a claim for the remittance basis would not be available.

Compliance/Tax Failure 

HMRC has noted that it has found 'common errors' in self-assessment tax returns for 2019/20, where a remittance basis charge would be expected. It has asked the taxpayers to amend the 2019/20 tax return, or otherwise get in touch where they believe the return should not need to be amended.

A claim for remittance basis can beneficial, however this is a complex area of UK taxation, and relevant individuals are advised to seek professional advice to ensure that they comply with the rules and pay the right amount of tax.

If you have received a letter, or you would like advice/assistance with your UK tax residence and/or claiming the remittance basis, please get in touch with a member of our team.

Home Is Where You Make It: Domicile, An Overview

Letter in the Mail: HMRC "Nudge" Letters for Residence and Domicile

Home and Away: An Overview of UK Tax Residence

Contact us today to discuss your tax requirements.
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