Remittance basis election

If you live in the UK, but are not domiciled here, you may benefit from making a claim to be taxed on the remittance basis.

Remittance basis

A UK resident taxpayer is generally subject to UK tax on their worldwide income. Residence is determined using the statutory residence test. Where you are resident in a tax year, but are not domiciled in the UK, there are further complications. Domicile is not defined in legislation; it is instead a general law concept meaning “the country that a person treats as their permanent home, or lives in and has a substantial connection with”.

You could, for example, have a non-UK domicile if you were born outside the UK and moved here to work. Where a non-UK domiciled person (non-dom) is resident in the UK in a tax year, they can choose to disapply the general rules discussed above and be taxed on the remittance basis. This means that they will only be taxed on their foreign income and gains to the extent that these are remitted, i.e. brought into the UK.

In most cases, you have to make a claim to the remittance basis on a self-assessment tax return. There are two exceptions to this:

• where you have unremitted overseas income and gains of less than £2,000 (the remittance basis will apply automatically)
• you are UK resident but non-domiciled for the tax year and you:
  • have no UK income or gains in the tax year (other than taxed UK income of less than £100)
  • make no remittances of foreign income and gains during the tax year
  • have been a non-domiciled UK resident for fewer than seven of the previous nine tax years, or are aged under 18 throughout the whole of the tax year
  • are not required to complete a self-assessment tax return for any other reason.

In either circumstance you may wish to make a written claim for the purposes of your own record keeping - although strictly this is not required. You can use our letter to do this. HMRC may not acknowledge it as the basis will apply automatically, but it will give you a written record of your intentions in case these are queried later on.

Declaration

Use our letter to write to HMRC accordingly. Just delete whichever of the two exceptions is not relevant to you.

Time limit

The Remittance Basis Election can be made at any time up to four years following the end of the tax year of the claim. However, as you would only be using this to create a written record, the automatic application of the basis would not be affected by a late letter.