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UK non-doms face new £90,000 remittance charge

The government is actively attempting to reduce the tax advantages of being a non-domiciled UK resident

3 December 2014

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UK non-domiciled residents who have resided in the UK for 17 out of the past 20 years will face a new £90,000 remittance basis charge (RBC) from the start of the new parliament, George Osborne has announced.

Delivering his Autumn Statement to the Commons, the chancellor said: "I want to preserve the non-dom status that makes our country attractive, but I want them to pay a fair contribution while having certainty about their future arrangements.

"In the next parliament the £30,000 annual charge will remain unchanged; those who have been here for 12 of the last 14 years will see their payment rise to £60,000; and I am introducing a new £90,000 charge for those resident in this country for 17 of the past 20 years.

James Hender, partner and head of the private wealth group at Saffery Champness said that the change will put non-doms in a difficult position, as they will have to predict their overseas income three years in advance.

"Increasing the remittance basis charge paid by some wealthy non domiciled taxpayers to £60,000 a year, and later to £90,000 a year, will be a popular move in the country. Less popular for the taxpayers affected will be the chancellor's proposal that, instead of a year by year decision to pay the charge, it could now be a binding three year election.

"Whether to make that election could be a very tricky decision as you are trying to predict overseas income three years in advance."

Reducing tax advantages

The change follows on from the new capital gains tax (CGT) rules for non-resident owners of UK homes, who (from April 2015) will be subject to full CGT and no longer receive a relief from the tax.

Kay Aylott of accountancy firm, Reeves, commented: "Under the new CGT for non-residents any gains arising on UK residential property will be subject to tax at either 18% or 28%. In order to prevent individuals circumventing these rules by owning property through company or trust these structures will also be liable under the new regime.

"The increase in the level of the RBC announced today will no doubt result in fewer non domiciles claiming the remittance basis of assessment and instead opting to be taxed on their world wide income. For non domiciles who have been resident for 17 of the last 20 years they will see an 80% increase in the RBC to £90,000 per annum and for a 45% taxpayers their offshore income would need to be in excess of £200,000 in order for a remittance basis claim to be worthwhile.

"Currently non doms can opt in and out of the remittance basis depending on the level of their offshore income and gains. The government announced today that they will be consulting on making the remittance basis election apply for a minimum of three years thus diminishing the available tax planning opportunities for non-doms."

He added: "The government appear intent on reducing the unfair tax advantages seen to benefit non resident and non domiciles."


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Tax & Wealth structuring