Non-UK domiciliaries and the £30,000 charge
On 12 February 2008, Dave Hartnett, the Acting Chairman of HMRC, published an open letter which sought to provide additional clarification concerning the Government’s proposed reforms to the tax treatment of non-UK domiciliaries with effect from 6 April 2008. He implied that, notwithstanding 26 pages of draft legislation, 24 pages of explanatory technical notes and 33FAQs, the Treasury’s aims had been widely misunderstood.
One of the welcome points which he mentioned was the following statement:
“Money brought into the UK to pay the £30,000 charge will not itself be taxable.”
It now transpires that this is not the full story. In order for such a remittance not to be caught for UK tax purposes in 2008/09 and later years, the cash in question must be paid direct to HMRC by electronic transfer or by a cheque drawn on a foreign bank account. If the sum is first paid into the non-UK domiciliary’s UK bank account for on-payment to HMRC, that will constitute a taxable remittance (so that, for a higher rate taxpayer, £50,000 would be required rather than just the £30,000).
Dave Hartnett’s letter should have made this clear.
Dear Lisa,
Joe was awarded a work permit to work in the UK.
His salary falls within the basic tax rate band.
He will come to UK and start working on 6/4/2008.
It does not make sense for Joe to pay £30,000 for remittance basis.
Will Joe need to make a return to HMRC and pay tax for tax-year 2008/2009 if he had an off-shore income or gains over £1,000? (even if he does not remit any of it and this gain&income is exempted from tax in his country of domicile)
Thanks in advance for your guidance
Joe
nb Joe has not been in the UK more than 90 days in any year.
Joe
As you have not been resident for 7 out of the 9 preceding tax years the £30K charge is not applicable to you yet. As such you can choose to be taxed on the remittance basis but if your overseas unremitted income is more than £1000 you will not be eligible for any personal allowances or annual exempt amount for capital gains.
If you choose this way you will need to ensure that your UK PAYE coding is correct and does not grant you personal allowances. If it does then you will need to make a tax return. The alternative is to be taxed on an arising basis - declaring all your income from around the world. This restores your personal allowances but means you will have to make a tax return to declare your foreign source income.
Thanks
Lisa
Dear Lisa,
Thank you for your prompt guidance.
Does the alternative suggestion in the 2nd par. of your reply imply that a person who is less than 7 years resident in the UK(or will arrive to work here on 6/4/2008) and who is anticipating an offshore income and gains of more than £1,000, which he does not intend to remit to the UK, will NOT be eligible to the personal tax allowance of £5,225 on his UK salary, or tax free ISA accounts etc.....unless he declares (starting fm tax 2008/09) all his world-wide income & gains on arising basis and pay tax. ( even if he does not intend to remit it to the UK)?
I hope I could make myself clear on this quite unclear -to me-situation.
Thank you in advance for your prompt guidance.
Joe
Joe
You are correct with the exception of ISA accounts which are unaffected by the rules.
Thanks
Lisa
Dear Lisa,
Thanks again for your prompt reply.
As I understand ,Joe needs to pre-empt and inform HMRC, in the beginning of tax year 2008/09, that he is anticipating an offshore income of say £6,000 which he does not intend to remit and request his PAYE code be adjusted accordingly?
Alternatively he may receive his net salary including the personal allowance but has to file a return and pay back £1,045 (£5,225X20%) and £1,200(£6,000x20%) on his offshore income on arising basis.
Is this as simple as it will get for a foreigner coming to work in the UK under basic tax rate remuneration from April08?
Thanks in Advance
Joe
Joe
Yes, that is correct.
Thanks
Lisa
I am a reatired American marrried to a British citizen
I have retirement funds from the U.S. I do not remit all this to this country and pay taxes on the amount that I do bring in.
My visa says that I have indefinite leave to remain in this country. I have been here srven and a half years.
Will I be affected by the new non dom tax proposals-
Conor
Absolutely you will and as an American there are particular issues which affect you. Suggest you call for specific advice on your situation."
Thanks
Lisa
Dear Lisa,
My Cypriot friend is a UK resident and is domiciled in Cyrpus. She got married to an Englishman in 1976 and has lived in the UK ever since.
She has a lot of land and property in Cyprus which she has bought and sold over the years and keeps her accounts all in Cyprus. Generally speaking no money comes into the UK. The property market in Cyprus has been strong and she has made a lot of capital gains over the years as well as some rentsl income.
As a non-dom she has not declared this in her tax return to date. If she chooses not to declare this, does she need to pay the £30,000 levy.
Thank you.
Christian
Christian
The £30K will have to be paid if your friend continues to rely on the remittance basis - ie not paying tax til she brings the funds to the UK. If she dos not pay she has to declare all her income and gains from around the world when they arise. The funds she has previously realised or earned will be taxed when she brings them here regardless of which option she chooses from 08/09 onwards.
Thanks
Lisa