In his Autumn Statement today the Chancellor announced changes to the remittance basis available to individuals resident but not domiciled in the UK. The proposed changes increase the annual remittance basis charge (RBC) for longer terms residents so that the top charge would be £90,000 per annum.
In addition the Government is proposing to consult on the ability of non-doms to be able to consider each tax year in isolation when deciding whether to be taxed on the remittance, as opposed to the world-wide, basis.
Individuals who are resident but not domiciled in the UK can elect to be taxed on the remittance basis so that only their UK income and gains are in a charge to UK tax. Offshore income and gains essentially stay out of a tax charge unless they are brought to the UK.
All individuals claiming this basis of taxation lose their personal allowance against income and annual exemption against capital gains tax.
Additionally for individuals resident for more than seven out of the last nine tax years there is an RBC of £30K per annum. There is no proposal to increase this.
For individuals resident for more than 12 out of the last 14 years the RBC is currently £50k. The proposal is to increase this to £60k per annum.
A new level of RBC at £90k per annum is proposed for individuals resident for more than 17 out of the last 20 tax years.
In addition, the government will consult on making the election to pay the RBC apply for a minimum of three years.
In his speech the Chancellor spoke about introducing these changes in the next parliament. Of course, he may not be Chancellor by then, and there could be a different government. However, given past events, it is perhaps difficult to see the next government, whoever they are, back tracking on these changes.
Of course, Moore Stephens will respond to HMRC on any consultations.
The government comments that making non-doms elect for the remittance basis for a minimum of three years would prevent them from easily being able to arrange their tax affairs so as to only pay the charges occasionally. Generally, it is not our experience that individuals opt in and out of the remittance basis. There are a number of practical issues and for years that the RBC is not paid, an individual is on a worldwide basis of taxation.
Individuals approaching 17 years of residence in the UK will need to consider their affairs very carefully. This is already the point at which a non-doms’ worldwide assets enter the UK’s inheritance tax regime and any planning may now have to take into account that the individual could well be taxed on a worldwide basis going forward with consideration of appropriate structures even more important.
The £50k RBC is already a tipping point for individuals moving from the remittance basis to a worldwide basis of taxation and the increase to £60k is likely prove even more so.
Private Client Tax team
Private client tax