RDRM32110 - Remittance Basis: Accessing the remittance basis: Exceptions to the claim requirements: Un-remitted foreign income and gains below £2,000 threshold
Un-remitted foreign income and foreign chargeable gains
Taxpayers may use the remittance basis without making a formal claim in a tax year if:
- they are UK resident in that tax year,
- they are not domiciled in the UK for that tax year or are not ordinarily UK resident for that tax year, (for years prior to 2013-2014 only)
- the amount of their un-remitted foreign income and foreign chargeable gains for that year is less than £2,000, (refer to Notes 1 and 2)
- they do not request a self-assessment tax return (under TMA70/s8),
Non-domiciled individuals with small amounts of foreign employment income who are exempt from liability to UK income tax under the terms of ITA07/s828A on that employment income cannot elect to pay tax on the remittance basis without making a formal claim - see Note 3 below.
Note 1: The reference to foreign gains is only relevant to individuals who are not domiciled within the UK. The reference to individuals who are not ordinarily UK resident applies for years up to and including 2012-2013 only. From 2013-2014 onwards access to the remittance basis is through non-domicile status only.
Un-remitted foreign income and foreign chargeable gains
The amount of an individual’s un-remitted foreign income and gains for a tax year is the total amount of their foreign income and gains for that year minus the total amount of those income and gains that are remitted to the UK in that year (ITA07/s809D(2)).
Note 2: Foreign losses cannot be set against foreign gains to work out if less than £2,000 of foreign income and gains of a tax year remains ‘unremitted’.
Also refer to RDRM31190 Exchange rates
Self-Assessment returns
Remittance basis users who meet the criteria above and are below the £2,000 threshold do not have to complete a self-assessment Tax Return in order only to claim the remittance basis. This is because for many such remittance basis users their foreign income or gains each year is minimal and they tend not to make taxable remittances. So there would be very little else to complete on the return.
Note 3: Non-domiciled individuals with small amounts of foreign employment income may receive an exemption from liability to income tax under ITA07/s828A - see RDRM32070.
Where ITA07/s828A applies, individuals are automatically taxed on the arising basis rather than the remittance basis. This applies even though the person may be ‘below the £2,000 threshold’ and would otherwise qualify to be taxed on the remittance basis without being required to make a claim.
It should also be noted that, depending on their circumstances individuals may be required to complete a self-assessment return for other reasons; for example if they do make taxable remittances of foreign income and gains. In such a case they should complete the relevant supplementary pages of the return including SA109 Residence, Remittance basis etc. and claim the remittance basis. The SA109 gives individuals the opportunity to tell HMRC that they qualify to use the remittance basis under ITA09/s809D.
See SALF100 onwards for more information about when individuals may need to complete a UK tax return.
Remember
Remittance basis users who are below the £2,000 threshold keep their entitlement to UK personal tax allowances and the Annual Exempt Amount for capital gains (refer to RDRM32040 Loss of personal allowances/Annual Exempt Amount). They are also not liable to the Remittance Basis Charge, regardless of the length of time they have been resident in the UK (refer to RDRM32260 - long term residents and the below £2,000 exception).
Example 1
Jason has been UK resident for 12 years; he remains non-domiciled in the UK.
In 2012-2013 Jason has total foreign income and gains of £80,000 for the tax year. During that tax year he brings £78,500 of it to the UK. This money is liable to UK tax upon remittance.
This leaves £1,500 ’un-remitted’ (also refer to RDRM31190 exchange rates). As this is less than the £2,000 threshold he can use the remittance basis without making a claim under ITA09/s809B for the relevant tax year if he so wishes.
He does not lose his personal allowances, or his Annual Exempt Amount. Although he is a long-term resident he is not liable to the Remittance Basis Charge.
However Jason will likely need to complete a self-assessment Tax Return as the £78,500 remittance to the UK will need to be returned.
Example 2
Joachim has an overseas bank account into which is paid various amounts of foreign chargeable earnings, totalling £25,000. He brings most of this to the UK shortly after he earns it. In 2012-2013 he spends £1,500 on a holiday in Italy for which he pays the Italian travel agent direct, using his foreign chargeable earnings for that year. At 5 April 2013 Joachim still has £1,750 of his foreign chargeable earnings for 2012-2013 that remains in his overseas bank account.
The £1,500 and £1,750 both count towards the £2,000 threshold (s809D) and so Joachim cannot use ITA09/s809D and use the remittance basis without claim in 2012-2013.
Money spent overseas must be taken into account when calculating the amount of income and gains not remitted to the UK. also refer to RDRM35400 Offshore transfers.
Example 3
Helena is not domiciled in the UK. She has a bank account in the Isle of Man into which she paid the proceeds from selling shares she owned in two non-UK companies. She has no other foreign income or gains in the tax year. In the tax year Helena has an unexpected bill to pay and for that reason she remitted £8,000 from her Isle of Man account to the UK.
Helena worked out that when she sold the shares she made a gain on one sale of £12,000. And that she made a loss of £3,000 on the other shareholding.
Helena had foreign gains in the tax year of £12,000 and she remitted £8,000. This means she has £4,000 of foreign gains remaining in the Isle of Man account and does not qualify to use the remittance basis without making a claim. The £3,000 loss cannot be used to reduce the unremitted gain to less than £2,000.
If Helena wishes to pay tax on the remittance basis she must make a claim as part of her self-assessment return. If she does so, one consequence is that she will lose her entitlement to personal allowances and the annual exempt amount - see RDRM32040. Helena would then have to decide if she wishes to make an election under TCGA92/s16ZA for her foreign losses to be available to set against her gains - see RDRM32060.