George Osborne MP, the Chancellor of the Exchequer, has today announced changes to the remittance basis charge (“the RBC”) for non UK domiciled long-term UK residents.
The RBC is an annual charge payable by long-term UK residents who claim the remittance basis of taxation. Remittance basis taxation allows non UK domiciled individuals to pay income tax and capital gains tax on their overseas investment income and gains only if these income and gains are brought into the UK.
The government had previously said that it would not make any further changes to non-domicile taxation for the 2010-2015 Parliament and that this commitment applied to the amount of the RBC. However, the Chancellor has used the Autumn Statement 2014 to increase the RBC. Thus, the annual charge will rise from £50,000 to £60,000 for those claiming the remittance basis of taxation once they have been resident in 12 out of the last 14 UK tax years. Non UK domiciled individuals claiming the remittance basis who have been UK resident in at least 7 out of the previous 9 UK tax years but fewer than 12 UK tax years will continue to pay the RBC at £30,000 a year.
In addition to the above changes, the Chancellor also announced a new charge. Non UK domiciled individuals resident in the UK in more than 17 out of the last 20 tax years will now pay a charge of £90,000 to claim the remittance basis.
The above changes will be effective from 6 April 2015.
Non UK domiciled, UK resident individuals will need to calculate if it is financially more attractive for them to pay the RBC and claim the remittance basis or pay tax on an arising basis (and keep their personal allowance and annual exemption). The rise in the RBC is likely to encourage more long term UK resident individuals to pay UK tax on an arising basis.
The Chancellor also announced that the government would be consulting on making the election to pay the RBC apply for a minimum of 3 years. The government’s thinking behind this change is to reduce the ability of non UK domiciled individuals to arrange their tax affairs so as to only pay the RBC occasionally. If this goes ahead in the future, it could have a major impact on remittance basis tax planning.
Finally, Mr Osborne also referred to plans outlined in a consultation at Budget 2014 to restrict the entitlement to the personal allowance for non UK residents. This will not now be implemented during this Parliament. He said: ‘Whilst the government believes there is a strong rationale for doing this, it recognises it is a complex change for both employers and individuals who may be affected.’ The Chancellor committed to undertaking a more detailed consultation if the decision was taken to go ahead with the plans at some point in the future. He confirmed that no change will come into effect before April 2017.