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Minimum Claim Period For Remittance Basis Charge

The consultation document arising out of the Autumn 2014 Statement, was published on 22 January 2015 and has announced that the aim of the consultation is to ensure that non-UK domiciled individuals “contribute their fair share to the UK” and are “not able to arrange their tax affairs with the aim of not paying the charge on a regular basis.”

Non-UK domiciled individuals may elect to claim the remittance basis so that UK tax on their foreign income and gains is limited to the extent that their foreign income and gains are remitted to the UK. However, those non-UK domiciled individuals that have been resident in the UK on a long term basis must pay a ‘remittance basis charge’ (RBC) for the privilege of being taxed on this basis and historically they have been able to opt in and out of the RBC, on an annual basis, as they feel appropriate .

The government is unhappy with the current rules and in particular, is concerned that individuals are arranging their affairs so that they trigger foreign income and gains in a single year rather than over a number of years.

Consequently the government is consulting on making the claim to pay the RBC apply for a minimum of three years (or alternatives) to meet its objectives.

Furthermore the government is consulting on how to treat periods falling after the first three year fixed term election, which could either be in the form of a further election for the following three years, or potentially a ‘rolling claim’, made on an annual basis, providing the remittance basis charge is paid each year. If the remittance basis charge is not paid in one of the following years, then it is understood the next claim would have to be for a further three years.

The consultation also refers to the government’s announcement in the Autumn Statement that with effect from 6 April 2015, the remittance basis charge for those resident for 12 of the 14 previous tax years will be increased from £50,000 to £60,000 and a new higher remittance basis charge of £90,000 will be introduced for those resident for 17 out of the previous 20 tax years.

No doubt many non-UK domiciled individuals will be looking to mitigate the effects of the proposed new rules before the end of the current tax year, or during 2015/16.  For someone meeting the 17 out of 20 year test, the minimum RBC in 2014/15 is £50,000; in 2015/16 it will be £90,000 but from 2016/17 it could potentially be £270,000.

Clearly it may therefore be appropriate to realise offshore income and gains, sooner rather than later, and specific advice should be taken.

The consultation closes on 16 April 2015 and it is anticipated that any changes to the minimum claim period for the RBC will come into force from April 2016.

For further details or more general advice on the Remittance Basis, please speak to Karen Spencer-Smith or your usual Saffron adviser.