Remittance Basis

Dear Tax:

I am looking to retire to Britain in a couple of years.  I'll most likely be using the Remittance Basis.  I read that if I have no UK income, I won't have to submit a Self-Assessment Tax Return.  Is this true?  I also read that I will have to pay the Remittance Basis Charge after 7 years, even if I don't have any UK income.

Your help clarifying if I need to file will be most helpful.  Thanks. 

Unless non-remitted income is below £2,000 a year the remittance basis can only be claimed by filing a self-assessment tax return.

Just curious what you use for money if you will have no UK income and will also not remit non-UK income and gains to the UK?

Thanks for the reply.  Makes sense about having to file a self assessment tax return to claim the remittance basis.  The money I plan on living on is "clean-capital" - income earned before I become resident.

The immediate practical planning for you is therefore to ensure that you do not mix post residence income or proceeds of sales realising gains with your “clean capital”. If you do so, the mixed funds rules will mean that you cannot remit clean capital without having first remitted income and gains.

You mentioned that you were thinking of retiring to the UK. This may mean that it will become difficult to avoid remittances in years to come. You might wish to look at the numbers if you were to be taxed on the arising basis. You would pay UK tax but claim credit against US tax. You might want to look at the overall implications.

There are various points to note-
•   You will benefit from the UK personal allowance and UK annual capital gains tax exemption if you do not claim the remittance basis.
•   Your dividend income will be taxed more highly if you claim the remittance basis now but later remit the income.
•   Under the changes proposed in the recent UK budget you will be limited to claiming the remittance basis for a maximum of 15 years.
•   Finally and most fundamentally the remittance basis depends on your status as a non-domiciled individual.  If you are moving to the UK to retire you might be thereby acquiring a domicile of choice in the UK. This is a harder matter to refute for you compared with someone who might reasonably claim that their UK presence is for say work related reasons and the long term intention is to return to the US.

There are therefore several matters to carefully consider for the longer term.

Thanks so much for your detailed response.

I meant to say that I want to spend more time in Britain when I retire.  The USA will most likely remain my domicile (e.g., it's where my family lives, most of my money is invested, etc.).

There are pros and cons to using the remittance basis.  Perhaps, as you pointed out, it would be better to be taxed on the arising basis.  Hopefully, the Double Taxation Agreements between the USA and the UK will help mitigate overall taxes if I chose the arising basis.

Again, thanks for taking time to respond to my post.  Cheers!

Thanks so much for your detailed response.

I meant to say that I want to spend more time in Britain when I retire.  The USA will most likely remain my domicile (e.g., it's where my family lives, most of my money is invested, etc.).

There are pros and cons to using the remittance basis.  Perhaps, as you pointed out, it would be better to be taxed on the arising basis.  Hopefully, the Double Taxation Agreements between the USA and the UK will help mitigate overall taxes if I chose the arising basis.

Again, thanks for taking time to respond to my post.  Cheers!

Even if you were to be resident in the UK your domicile would probably remain the US if that's where you and your family were born and habitually live.

There are plans to abolish the non-domicile concept.


Sent from my iPad using Tapatalk

Thanks Vinny for your response.  I too heard that the concept of non-doms using the remittance basis might be on the way out.  Because of the uncertainty, I wil most likely do my tax planning based on the "arising basis".

Thanks Vinny for your response.  I too heard that the concept of non-doms using the remittance basis might be on the way out.  Because of the uncertainty, I wil most likely do my tax planning based on the "arising basis".

Your intentions and time spent in the UK will determine your tax residency status. If you intend to retire to the UK permanently and spend the majority of time in the UK you will probably be UK tax resident and taxed on an arising basis even if you remain US domiciled.

Thanks Nun.  There in no doubt that residence status and permanent settlement will effect my tax situation.  I continue to weigh all options.

Again, thanks for your time and input.

I would like to add a few details to clarify the recent replies.

It would appear that Luvbritain may be a resident of both the UK and the US for tax purposes. UK residence is now a matter of statutory rules, and can be complex to interpret, depending on individual circumstances. If however he is dual resident, he should look at the double tax treaty. In particular, Article 4(4) contains a tie break clause.  UK taxation only needs to be considered in the event that he is UK resident after the benefit of the treaty (except for any UK source income.)

The current government proposal is not be completely abolish the remittance basis for residents. The proposal is only to deny the use of the remittance basis for long term residents. In this context, the measure of long term is 15 years of residence.

The remittance basis is only available to individuals who have a non UK domicile. Domicile is not defined by statutory rules in the UK. It is a common law concept. Luvbritain starts with a domicile of origin in the US. It would require positive actions to displace this with a domicile of choice in the UK. I would depend on a variety of factors.

In conclusion, Luvbritain should first consider his residence position firstly under UK rules then under the double tax treaty. If he is resident the remittance basis will remain available to Luvbritain for many years, in the absence of actions to adopt a domicile of choice of one of the countries in the UK. The arising basis may however be the better long term option even if the remittance basis is available.

Thanks Dunedin for your concise summary of current / proposed UK tax law and for outlining my options.  Before I make any decisions about obtaining UK residency, I plan to meet with both a UK immigration solicitor and an accountant.   Your comments will certainly help me in those discussions.