Is it best to notify HMRC in advance of remitting capital-only funds to UK?

I am planning to make 2 cash wire transfers (each over $10K/£10K) from my US Brokerage (via XE.com who will convert the dollars to GBP) into my UK brokerage.

1 transfer is from CAPITAL only US account (no tax due when remitted to UK).  (This is a "clean" capital account.  All gains made after I became UK resident were swept into a separate Income accounts when incurred.)

1 transfer is from CAPITAL GAINS (only) US accounts (15% CGT was paid in USA a few years ago.  I plan to use the DTT to reduce the CGT tax due in UK. I expect an extra 5% to be due in UK (20% UK CGT less the US 15% CGT already paid).  Will the UK CGT Allowance of £11,100 apply?

Does this make sense?

To avoid an audit by HMRC should I send them a letter, explaining the facts, in advance of doing these wire transfers (I understand all wires over 10K are "looked at")?  What's the best approach? (I don't want to reduce the wires to under 10K amounts). To where/who at HMRC would I send my letter?

I have all statements if necessary to prove the facts.  However I may have to send 100+ of them if audited and it might get complicated.

The UK currently has a self-assessment tax system. One self-assesses. I am not sure on what statutory basis you expect HMRC to comment?

Even if your first question is accurate; the second comment is incorrect. The UK has the primary taxing right. You would need to seek relief in the US for any UK tax, rather than the other way around.

The UK currently has a self-assessment tax system. One self-assesses. I am not sure on what statutory basis you expect HMRC to comment?

Even if your first question is accurate; the second comment is incorrect. The UK has the primary taxing right. You would need to seek relief in the US for any UK tax, rather than the other way around.

The Capital account contains Capital (only) from a time when I was non-resident & non-domiciled in UK.  The Capital Gains (only) account was crystallised at a time when I was UK resident but non-domiciled in UK.  So I don't believe your statement is accurate - can you please confirm?  The US has/had the primary taxing right (and that was paid) so I should claim back from the UK upon remittance (now) to UK.

(I have filled out UK SA forms for years.  My non-domiciled status was on the corresponding tax years' SA forms.)

You've lost me. Since 2008 it has cost a remittance charge to elect to claim the remittance basis. There was no charge before 6 April 2008; but it still required a formal claim on a tax return. If you have unremitted gains today from a time when you were resident in the UK but had not acquired a domicile of choice in the United Kingdom, the following questions arise:
1. In which UK tax years did the gains arise?
2. On what date did you acquire a domicile of choice in one of the countries of the United Kingdom?
3. Why did you elect for the remittance basis in the year(s) that the gain(s) were made if this election would increase your overall liability?

Please note that the SOL in the States for claiming foreign tax credits is 10 years; so you may still be in time to amend your US return if it is not consistent with the UK position.

You've lost me. Since 2008 it has cost a remittance charge to elect to claim the remittance basis. There was no charge before 6 April 2008; but it still required a formal claim on a tax return.

This is & was not true for new arrivers in UK. 
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Under section 809C, a non-dom who is resident in the UK for 7 out of the 9 preceding tax years pays an annual charge on their foreign income and gains, as defined in section 809H, of £30,000 ------- https://www.gov.uk/government/uploads/system/.../Remittance_Basis_Charge.pdf
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My situation:

Arrived UK -- TY 2006/07 after 20 years prior in US.
Non-Domiciled UK (as stated on all my UK SA forms) from then through end of UK TY 2012/13.
After this time, I choose to be domiciled in UK and (only) after that time would the £30K remittance charge have started to occur.

Capital Gains were incurred/crystallised during my time as non-dom UK in 2012.

I was taxed on the "remittance" basis to UK during the time of non-dom.  I hadn't remitted the Cap Gains or the Capital account (as that's what I am about to do now).
I paid all US taxes on the Cap Gains etc during this time.

Now that I am "UK domiciled" I STILL will be taxed if and when I actually REMIT any moneys associated with all of this.  And that's what I am about to do.....

Don't confuse capital gains with dividends. Under the treaty you pay the IRS tax on US dividends and can claim a credit for that against UK tax......for capital gains the UK has the primary taxation right and you pay the UK first and then claim a tax credit against any US tax due.

We do not have enough facts, but assuming that you were not domiciled in one of the countries of the United Kingdom when you claimed non-UK domicile, it does not sound as if you have ever abandoned your previous domicile of origin or choice on 6 April 2013; but have simply decided not to claim the remittance basis since that date.

The UK has the primary taxing right to capital gains. Credit will need to be claimed in the United States.

We do not have enough facts, but assuming that you were not domiciled in one of the countries of the United Kingdom when you claimed non-UK domicile, it does not sound as if you have ever abandoned your previous domicile of origin or choice on 6 April 2013; but have simply decided not to claim the remittance basis since that date.

The following 5 points should be assumed true for this discussion:

1) became resident in UK since TY 2006/2007. 

2) I had UK non-dom status from then until 4/2013 (start of TY) and elected to be taxed on remittance basis until then.

3) In 2012 I made some foreign Cap Gains (in USA accounts).  That money is in a Cap Gains-only account (in US) and has avoided any co-mingling with any other types of funds since then (any income has been swept out). 

4) I paid US CGT tax on this gain at 15% as normal.  No tax was due in UK in TY 2012/13 as I was non-dom.

5) In 4/2013 (and true since) I became solely domiciled in UK.  As stated on 2013/14 SA tax form then and in future years.  Since then I was taxed on the Arising basis as normal in UK as a UK-domicile.

All of the above should be assumed true for this discussion.

I now will be moving this Cap Gains money from the US to UK.  As such I am remitting funds that were previously excluded from UK tax when I was taxed on a remittance basis (as a non-dom in the past).

Q1) I think I am still due to pay UK CG Tax on this remittance.  Even now when I am domiciled here.  Even after the US CGT has been paid on this as I was UK resident+NON-DOMICILED at that time.  The money is now BEING REMITTED to the UK.  Doesn't matter that it's "many years later" ?  (or is it just now regarded as "capital" not subject to UK CG tax? -- I don't think so)

Q2) However, UK will credit me for past CG Taxes paid to the USA (when I was non-dom in UK and as I am a US & UK dual-citizen).  I already paid 15% CGT (in USA) and should normally be due 20% CGT (in UK).  I expect this to be reduced to 5% CGT payable in UK now ?  And I do not expect to have to reclaim any CGT refunds back from the US as they were the prime taxing authority when this Cap Gain occurred as I was at that time non-dom in UK.

See: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/528018/RDR1-residence-domicile-remittance.pdf

in particular sections: 6.46 and 6.47
also sections: 5, 5.16, 5.21, 5.5

What was:
1. Your domicile of origin
2. Your domicile when you arrived in the UK

How did you shed your previous domicile? Courts have long held that domicile status  remains "sticky" and "tenacious". I cannot follow how anyone could change domicile in as little as the period between 2006/07 to April 2013. It is simply impossible to imagine that a decision could be made in such a short time to abandon a previous domicile and to stay in a new domicile (in one of the countries of the United Kingdom) for the rest of anyone's life.

Have you renounced US citizenship? Have you visited the US? Do you have a US drivers license? A US passport? A US club membership? Do you vote in the US? Why do you think you abandoned a domicile in whichever of the 50 States you were previously domiciled (through origin, dependency or choice).  Do remember that if you abandon a domicile of choice you return to your domicile of origin, which may not be where you currently have resided for such a short time.

If and only if your assumptions on domicile are correct, the answer to your questions on remittances will require a thorough read of the legislation; which will take anyone several days to read, understand and digest.  If the numbers are significant, you might consider engaging a tax professional to provide advice.

I am confident that the things I said in my posts "should be assumed true". Nothing in your questions leads me to believe otherwise.

Does anyone have comments about my actual questions?

The following observations may be of assistance to cvc8445.

The analysis under Q1 is correct. The UK liability is on a combination of income/gains on the arising basis plus remittances of past unremitted income/gains. The gains must of course be calculated in sterling terms, using exchange rates at purchase and sale.

The assumption under Q2 is not correct. As Nun said, the UK has primary taxing rights. The UK will tax the gain (in sterling terms) at current UK tax rates. It is for the US to give any credit for that tax against US tax. An analysis of the DTR will confirm this position.

Here lies the problem. The US will not allow the current UK tax on the remitted gain to be related back to 2012. But that was a flaw that cvc8445 should have been advised on if advice was taken to use the remittance basis.

cvc8445 also said that "any income has been swept out”. Please note that if income is paid into an account, even for a day, and later transferred to another account, this will not be effective for UK tax purposes. Under the rules on mixed funds, part of any future remittance from that account will be of income first.

It is for the US to give any credit for that tax against US tax. An analysis of the DTR will confirm this position. The US will not allow the current UK tax on the remitted gain to be related back to 2012.

Thanks for your comment Dunedin.  Can you point me to anything to substantiate why the US wouldn't allow (through DTR) the CGT that was paid to the US in 2012 to be credited against a remittance in the UK in 2017? (is there a limit on the number of years DTR applies?) 

As I was non-dom (US citizen but resident in UK) in 2012 when the US Cap Gain was incurred I thought that gave the US the rights to tax that money solely?  Just doesn't seem logical, fair, or in the spirit of the DTT that UK would expect 20% now (on top of the 15% already paid in US).  Can you point me to the substance of where this is in the tax law and any possible recourse I might have - like appealing to the UK for relief of what is clearly a double-tax.

What's the logic as to why DTR shouldn't apply across multiple years?  Is there a cut-off point in terms of the number of years such double tax relief can be requested?
The implication seems to be that such money can never be remitted to UK?  But the DTT is supposed to fix this problem.

Dunedin:

Shouldn't this FTCR be used to reduce the CGT due in UK to 5% (instead of the full 20%) in UK?

FROM PAGE 11 of HMRC "Foreign Notes": 
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https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/505147/sa106-notes_2016.pdf
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Capital gains – Foreign Tax Credit Relief and Special Withholding Tax
Boxes 33 to 40
If you have paid tax in a foreign country on a gain and you want to claim Foreign Tax Credit Relief (FTCR), fill in box 33 and boxes 37 to 40 (in UK pounds) as appropriate. Don’t fill in boxes 34 to 36.
If you have more than one gain, show this information on a separate sheet. Include in boxes 33, 37, 39 and 40, any amounts you put on the separate sheet.
If you want to claim FTCR, put ‘X’ in box 38. You don’t have to work out the FTCR yourself. If you want to work it out, use Helpsheet 261, ‘Foreign Tax Credit Relief: capital gains’ to help you. Put the amount you are claiming in box 39.
If the proceeds of a sale chargeable to Capital Gains Tax had Special Withholding Tax (SWT) taken off, put the SWT amount in box 40.
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Further to my comments above (which I'd still value opinions on I have noted this:

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Under most Double Taxation Agreements (DTAs), gains other than those on real property (for instance land and buildings) or those accruing to a permanent establishment in the UK are only taxable in the country where you’re resident and are exempted from tax in the country where the gain arises. If this is the case with your gains then you can’t claim foreign tax credit relief against UK tax. You should be claiming exemption from the Capital Gains Tax in the country where the gain arises instead.

https://www.gov.uk/government/publications/foreign-tax-credit-relief-capital-gains-hs261-self-assessment-helpsheet/hs261-foreign-tax-credit-relief-capital-gains-2016
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and from this good overview article:

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A remittance of non-UK income or gains can sometimes result in severe adverse consequences in that, not only is the remittance subject to UK tax, but economic double taxation can arise as a result of neither the US nor the UK rules permitting a foreign tax credit. For example, if the income was received in a previous calendar year, then the US individual will most likely already have paid US tax on the income. The UK rules may deny a foreign tax credit on the basis that the UK has the primary taxing right to the income under the UK/US treaty. The US rules governing foreign tax credits generally require that the foreign tax is paid or (if an irrevocable election is made) accrued in the same year as the income is subject to US tax. Failure to meet these requirements can result in the UK tax not being creditable.

http://www.taxadvisermagazine.com/print/6710
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So, given this situation I am considering the possibility of:

- Remitting the cap gains later to the UK and paying the UK CG Tax.
- Revising the US tax return for the "year of the CG sale" to claim a refund of the US CGT I already paid by using the 1116 FTC form using the "accrued FTC" method.
Does this make sense?

Perhaps it would be helpful to start with some general comments.

A country in which an individual is resident generally has primary taxing rights. For cvc8445 this means the UK. Most countries also tax income that arises from sources within their countries, even for non-residents. Some tax capital gains, but usually only in respect of land related gains. The US, almost uniquely, has chosen to tax its citizens, irrespective of residence, on their worldwide income and gains.

Against this general background, the UK US double tax treaty sets out who has primary taxing rights and so forth. The treaty should be read with care. Most its provisions do not apply to UK resident US citizens. There is a reduced set of rules which do apply.

The provisions which do apply confirm that the UK can tax gains on the sales of US situated assets. (This is subject to special rules for land related gains.) It is then for the US to give credit for the UK tax.

(The double tax treaty provides for some situations where the UK must give a form of credit for US tax. In general, when US dividends are paid to a UK resident the UK resident can claim to reduce the normal 30% withholding tax to 15%. For UK resident US citizens, this is modified. The UK taxes the US dividend giving a 15% notional tax credit. The US then gives credit for the UK tax computed in this way.)

The reference to the tax return notes made by cvc8445 is misleading. Claims can only be made when the double tax treaty allows this. It is not a case of simply claiming any foreign tax.

It is too late for cvc84445 to amend the self-assessment for 2012. The time limit for amendment is broadly 12 months after the filing deadline.

There might an avenue to consider to saying to HMRC that all, or at least some, of the past returns where remittance basis was claimed were erroneous because the domicile of origin in the UK when cvc8445 returned to the UK in 2006, or at a date after this. This would need careful, detailed consideration.

I cannot further comment on the details of the US rules for giving credit for foreign tax. Perhaps others would confirm the mismatch, or make other suggestions.

In passing, the changes to non-doms from 6 April 2017 include specific rules for returning individuals who had UK domelike of origin. Broadly they deem the individual to be UK domiciled for tax purposes even where this would not be the case under international private law principles.