As has been well publicised, the Finance Act 2008 included a charge for the continued use of the remittance basis of assessment for people resident in the United Kingdom for seven out of nine years.

The charge amounts to an annual “tax” payment of £30,000. There is a complicated nomination process, which is required in disclosing this claim and the remittance basis charge to the Inland Revenue.

Each year a non-domiciled individual must decide whether or not to make a claim to the remittance basis. If such a claim is made by long-term residents they must pay the £30,000 remittance basis charge, lose their entitlement to their personal allowances/annual exemption and be taxed on all foreign income and foreign chargeable gains that are remitted to the United Kingdom.

In the event the foreign domiciled individual does not claim the remittance basis they will automatically be assessable to tax on income and gains arising anywhere within the world as they arise. This will not affect their foreign domicile status and they can make a claim to the remittance basis in a later year. Paying the remittance basis charge of £30,000 does not mean that HMRC will ignore a non-domiciled person’s status.

It appears that it does intend to look at cases where

• The taxpayer has been in the UK for a significant period of time;
• Information provided is inconsistent, for example information provided to other government agencies; or
• Information held by HMRC suggests, in their opinion, there may have been a change to the taxpayer’s intention.

Domicile is a complex area of UK law, and the burden of proof rests very much on the person trying to prove the change. As can be appreciated, it is important that those who wish to maintain their foreign domicile have sufficient evidence to refute any potential challenge from HMRC.

Careful consideration will need to be made in due course to the disclosures and nominations made on the 2008/09 Tax Returns for those of a foreign domicile.

For further information, please contact

Martin Peddie, Partner
T: 01252 894915
E: mpeddie@menzies.co.uk