RDRM32370 - Remittance basis: accessing the remittance basis: remittance basis charge - nomination of foreign income and gains: example - insufficient nomination

Isabella is a non-domiciled long-term UK resident who has claimed the remittance basis for 2014-15. She has £80,000 of UK employment income, and her un-remitted foreign income and foreign gains for the year are as follows:

  • relevant foreign income - bank interest £45,000
  • foreign employment income £5,000
  • foreign capital gains £190,000

Isabella pays tax at a 40% tax rate on her nominated income and 28% on her nominated foreign gain. Nominated income and gains are taxed as if the remittance basis did not apply to them (ITA07 s809H(2)). Isabella chooses to nominate £10,000 of her foreign gains, and £40,000 of her bank interest (RFI), which creates a relevant tax increase of only £18,800

Under section 809H(4) a further £28,000 of foreign income is treated as having been nominated, to create a further £11,200 of income tax due.

Calculation (a)

Non-savings income

  • £31,865 x 20% = £6,373
  • £48,135 x 40% = 19,254

Savings income

  • £40,000 (nominated RFI) x 40% = £16,000
  • £28,000 x 40% (2) = £11,200 (foreign income (1) nominated under s809H(4)

Capital gains

  • £10,000 x 28% (4) = £2,800

Total income tax and CGT due £55,327 (3)

Calculation (b)

Non-savings income

  • £31,865 x 20% = £6,373
  • £48,135 x 40% = £19,254

Total income tax due £25,327 (3)

Relevant tax increase:

  • is total (a) £55,327
  • less total (b) £25,327
  • equals £30,000

Notes

  1. Section 809H(4) only allows an amount to be treated as foreign income, not capital gains, regardless of whether the individual has sufficient income to have made such a nomination. The actual composition of their offshore portfolio or their own nominations is irrelevant.
  2. Income merely treated as nominated will be taxed at the prevailing higher rate for employment/savings income, but it is not necessary to determine its precise nature.
  3. As a remittance basis user, Isabella has no personal allowances due.
  4. Rates used here for the purposes of this example only; use the rates applying in the relevant tax year.

Also refer to RDRM35100: remittances of nominated income or gains for details about the rules that may apply if Isabella remits any of her nominated income or gains in later years.