HMRC “Nudge” to Remittance Basis Users

HM Revenue & Customs (HMRC) have confirmed that they are to write to all UK tax residents that claimed the remittance basis in their 2011/12 tax returns.

The remittance basis is available to UK residents that are non UK domiciled and allows the taxpayer to pay UK income tax and capital gains tax only on foreign income and gains that are remitted to the UK (in comparison the normal rule is that a UK resident is liable to tax on their worldwide income and gains).

Prior to 6 April 2013 the remittance basis was also available to UK domiciled taxpayers provided they were non ordinarily resident in the UK.  However, the concept of ordinary residence was abolished most tax purposes in the Finance Act 2013.

This letter is being described as a ‘nudge’, because HMRC believe that many taxpayers have got it wrong in the past when it comes to identifying all remittances when completing tax returns.

Therefore HMRC’s stated logic for the letter is to educate non-domiciles about the various guises that a remittance can take.  This should therefore reduce the need for tax enquiries.

Examples of remittances include :-

–          Transfers of money to the UK

–           Assets transferred to the UK

–          Settlement for services provided to the taxpayer in the UK

–          Using a UK credit card, or utilising a foreign credit card in the UK

–          Taking out offshore loans to fund UK .. assets, living or services

–          Transfers of monies/assets to the UK, involving gifting to and from other people

–          Exchanges of the use of overseas assets with UK assets

However, what is and isn’t a remittance is a difficult area and any non-domiciles utilising the basis should take tax advice in relation to any transactions where any of their overseas assets, monies, debts, services etc start to interact with the UK.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Email Address:

Subscribe

Non Domiciled Tax Planning – Moving on from Bearer Warrant Schemes

Update – case of Hossein Mehjoo v Harben Barker to be appealed.  See our recent blog for more information https://pdtaxconsultants.wordpress.com/2013/06/24/hossein-mehjoo-v-harben-barker-negligence-appeal/

Hossein Mehjoo v Harben Barker & the Bearer Warrant Scheme In the recent case of Hossein Mehjoo v Harben Barker, the High Court found that an accountant that failed to make his client aware that his non-domicile tax status could haven given rise to tax planning not available to an ordinary domiciled taxpayer was guilty of negligence (see https://pdtaxconsultants.wordpress.com/2013/06/07/hossein-mehjoo-tax-planning-advice-negligence/ for more detail). The case focused on the Bearer Warrant Scheme (BWS) which was widely marketed at the time. In brief, the premise of BWS was that shares in a UK company were converted into bearer warrants which were treated as being situated in the country in which they were physically present.  The non-domiciled taxpayer could then visit an offshore jurisdiction, such as Jersey, and gift the bearer warrants to an offshore trust set up by the taxpayer.  The gain on a subsequent disposal would therefore arise to the non resident trustees and not the taxpayer thus saving significant amounts of capital gains tax. Following changes introduced by HMRC in March 2005, BWS is no longer utilised as a tax planning opportunity for non-doms because bearer warrants issued by a UK company are treated as being located in the UK and not the compamy in which they are physically situated http://www.hmrc.gov.uk/manuals/cgmanual/cg12440.htm Current Non Domicile Tax Planning There are numerous differences between the tax treatment of UK domiciled and non UK domiciled taxpayers, thus giving rise to non-dom tax planning opportunities in terms of not only capital gains tax but also income tax and inheritance tax. With any form of tax planning, it is important to consider the particular circumstances of the taxpayer including tax, legal and commercial considerations.  Therefore one size fits all schemes are unlikely to be appropriate in the majority of cases. Current tax planning opportunities available for non-doms depend on factors such as the taxpayers residence status, length of residence, current asset portfolio/asset structure and will need to be considered in light of the remittance basis rules and new statutory residence test as well as anti avoidance provisions.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Email Address:

Subscribe