Autumn Statement Remittance Basis User

Autumn Statement Remittance Basis User Changes with higher taxes for 11 yrs plus and 17 yrs plus residency.

Transcript:

Hello there, so it's about an hour ago that Sir Chancellor George Osborne finished is the pre-budget speech, the autumn statement and I just finished analysing and looking at the small print and how that really affects our financial planning.

With this one, the subject is non-domiciled people and talking about a remittance user basis.  So most people, we are British nationals, we were born in the UK, we’re resident in the UK, we’re subject to income tax on worldwide income and also we are domiciled in the UK.

Domicile: think of it like your homeland.  Your homeland you acquire from your father at birth and so you as a British born person, to a British father, you are UK domiciled, you are resident so you are subject to income tax on your worldwide assets. you are domiciled so you are also subject to other issues with regard to capital gains tax and indeed inheritance tax on your worldwide assets.

Now clearly we are a cosmopolitan nation and we have a lot of foreign nationals who are resident in the United Kingdom for income tax but they're not domiciled.  There are certain rules for those which, I’ll cover in very brief details now. 

So there is something called the remittance user basis for non-UK domiciled people who are resident here for tax and in very simplistic terms they can elect to be domiciled (in UK) which means that they’re taxable on their worldwide income and inheritance tax and things like that.

or

They can elect to retain their domicile and work on a remittance user basis. [And] in simple terms what that means is:  Is if they have income in the United Kingdom that’s taxable in the United Kingdom but if they have income outside of United Kingdom which they don't necessarily bring into the UK, there’s a limit there of £2,000 per annum income that the UK government will ignore. 

Now under a remittance user basis, this is where we’re looking at the super wealthy where perhaps we’re looking at: why do lots of famous people live in in the United Kingdom?  They have houses in London and things like that and Oxfordshire, all the nice counties and nice places to live.

Why do people come to live in Britain?

Why is it rich foreign nationals come to live in Britain?

Part of that is to do with the remittance basis, the remittance user basis, and in very simplistic terms where that stands at the moment is:

If you've lived [in UK] for seven out of the nine previous years, so you’ve been resident, you've lived here for 7 out of 9 years you can opt for

1. To pay income tax on your worldwide income or alternatively
2. You can pay a one-off tax charge, each year of £30,000, and that’s deemed as a tax paid for your income from overseas

The second band for that is for non-domiciles who lived in the UK for 10 out of the last 14 years, looking at their foreign income, if they pay a tax charge of £50,000 but now that he's increasing to £60,000 as part of this budget, again they pay tax £60,000 on a remittance user basis and they might be earning millions outside of the country but provided they’ve pay their tax charge, the remittance basis and pay tax of £60,000 now no problem.

What the Chancellor also did was he announced another level to this and this was for people who had been resident in the United Kingdom for 17 of the last 20 years. So tax resident in the UK but using the remittance basis where, from now on, they will pay a tax charge of £90,000 or be taxed on their worldwide income.

So that some changes there to the remittance user basis.  In very simplistic terms:

-       If you are UK resident and UK domiciled you’re taxed on your worldwide income

-       If you are UK resident but you are domiciled elsewhere then you either have the choice of

• 1. To elect to pay income tax on your worldwide income in the UK or alternatively
• 2. You can elect to go for the remittance user basis where, like I’ve have said if it’s below £2,000, income can be ignored but if you’ve got millions and millions then the way that operates is if you have lived for 7 of the last 9 years, tax payable £30,000 (you can elect to do that instead of paying tax on your worldwide income) or if it's 10 to 14 years, (10 years resident in the last 14), it will now be £60,000 payable and this new one: so that will catch more and more people been staying here over and above 17 years if you've been resident for the last 20 years: then that tax charge each year is now been hiked to £90,000 pa.

So it just may be that somebody who is non-non-UK domiciled but resident, you may be need to seek professional advice in terms of: “right, how do I now look at my investments?  Do I change how they are invested to not generate income?”

So that's part of the autumn statement, budget 2014, December 2014, where they’ve revisited non-domiciled residents of the United Kingdom and looking at the remittance user basis.  Thanks very much for watching.”