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What is the remittance basis and what is going to change?

HMRC news source dated 15 June 2022 suggests that people should receive letters who are tax residents in the UK for 7 years out of the preceding 9 years and 12 out of the proceeding 14 years.

Let’s understand first what is remittance basis?,

Individuals who are non-residents in the UK but have foreign income or gains can apply for the remittance base as an alternative tax treatment. If you are considered domicile in the UK, a remittance basis will not be available. If you are deemed domicile, you will be considered to have been born in the UK and have the UK domicile of origin OR You must also have been resident in the UK for at least 15 years of the 20 previous tax years.

What is Deemed domicile?

If either Condition A or Conditions B are met, you will be considered Deemed domiciled in England even if you are not actually domiciled in the UK.

Condition A

You must be met

  • Be born in the UK
  • The UK is your country of origin
  • Become a resident of the UK in 2017-2018 or later years

Condition B

Condition B is satisfied if you have been a UK resident for at LEAST 15 years out of 20 tax years immediately preceding the relevant tax year.

What is the news about UK residency and the remittance basis charge update?

HMRC will begin sending letters to wealthy taxpayers and agents in June 2022. These letters will go to tax residents who have lived in the UK for at least 7 years, and 12 years respectively.

These taxpayers are required to pay the remittance base charge (RBC), of PS30,000 or PS60,000, or move to the arising basis taxation.

This letter will outline the steps needed, giving taxpayers enough time to amend their 2020-2021 returns. The letter will inform them about the steps required in order to amend their 2020 to 2021 Self Assessment tax returns. The letter advises that amendments must be made within 60 days. HMRC could open an inquiry to verify the correct position if no amendments are made.

Customers will find the information in the Residence domicile and Remittance base manual (RDRM32220), more clearly regarding the year count for remittance purposes.

This guidance reiterates the requirement that taxpayers be tax residents in the year of their arrival, departure, or split year to be considered a year of residence for purposes of remittance base charge. These years will be accurately included in the year count and aid in preparation for taxpayers’ tax returns.

Additionally, the Self Assessment tax returns (SA109), will be updated to better educate taxpayers before they file their 2021-2022 tax returns.

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