An individual who is tax resident in the United Kingdom in any given tax year (which runs from 6 April to 5 April each year) will be subject to UK income tax and capital gains tax (CGT) on their worldwide income and gains as they are generated (known as "the arising basis").
However, if the circumstances of an individual allow, it may be possible to elect for "the remittance basis" to apply instead. Individuals taxed on the remittance basis are:
- still liable to UK income tax and CGT on their UK source income and gains realised on UK assets; but
- only taxed on non-UK source income and gains realised on non-UK assets if these funds (or property deriving from them) are "remitted" to the United Kingdom.
The remittance basis is available (under the right circumstances) to individuals who are UK tax resident but not UK domiciled (often referred to as "non-doms"). In the United Kingdom, the concept of "domicile" (broadly speaking) denotes the jurisdiction with which an individual is most closely connected and is often said to be the country that they consider to be their permanent home, or where they intend to end their days. Whereas an individual may be tax resident in more than one jurisdiction at any given time, an individual is only capable of having one domicile.
Assuming an individual is not currently domiciled in the United Kingdom, they will only acquire a UK domicile under the common law if they reside in the United Kingdom and they do so with the intention to reside there "permanently and indefinitely".
The remittance rules are complex, and the definition of what constitutes a remittance is extremely wide. It is also important to note that, under certain circumstances (relating largely to a lengthier or more permanent stay in the United Kingdom), there may be an annual charge for claiming the remittance basis or an individual may lose the ability to be taxed on the remittance basis completely.
There are also special rules for employment income. Further, if an individual remains tax resident in another country, the United Kingdom may have a double tax treaty with that country, which may mitigate any potential double taxation.
For further information on this topic please contact Kelly Noel-Smith or John FitzGerald at Forsters LLP by telephone (+44 20 7863 8333) or email ([email protected] or [email protected]). The Forsters LLP website can be accessed at www.forsters.co.uk.