Urgent action is now necessary for those ‘Non-Doms’ taxed on the remittance basis, where they still have a pre-4th August 2014 foreign loan from which funds have been used in the UK.
Prior to a change of view by the UK tax authorities, UK resident non-domiciled individuals were able to take out a loan secured on their untaxed foreign funds constituting foreign income and gains, and then remit the loan proceeds to the UK. Such amounts remitted to the UK were not then taxable under the remittance basis of taxation, so long as the interest on the loan or any loan repayments were made from ‘clean capital’.
Based on the view now taken by the UK tax authorities, such loan proceeds remitted to the UK in relation to new loans, are deemed to be a taxable remittance for an individual taxed on the remittance basis.
This change of view announced last year was with effect from 4th August 2014 for new loans, and, as far as previous arrangements are concerned, to avoid such remittances becoming taxable it will be necessary to:
a) notify HMRC of the existence of the loan arrangements by 31st December 2015, and
i) repay the loan using ‘clean capital’ by 5th April 2016; or
ii) replace the collateral for the loan with ‘clean capital’ by 5th April 2016.
Both of these options could prove difficult if clean capital is not available, or the original loan funds are tied up in long term investments.
As such, it is imperative that individuals with such arrangements review their position without delay, and your usual Saffron contact would be happy to discuss how we can help.