RDRM32435 - Remittance basis: Accessing the remittance basis: Remittance basis charge: Payments on account: Changes from 6 April 2012
Prior to 2012-2013, if a remittance basis taxpayer made a payment on account from their foreign income or gains in respect of the next year’s remittance basis charge and subsequently did not claim the remittance basis in that year; the funds used would be a taxable remittance (see RDRM34030).
From 6 April 2012 an individual who:
- claimed the remittance basis in year 1
- makes a payment on account from their foreign income or gains for year 2 on the basis they will claim the remittance basis in year 2, and pay the remittance basis charge
- does not subsequently make a remittance basis claim for year 2
will not be treated as having remitted their foreign income or gains, provided money equal to the foreign income and gains used to make the payment on account is taken offshore by 15 March following the end of year 2. The money taken offshore is treated as having the same composition of income and capital as the money used to make the payment on account.
Example
Ingrid, a long-term UK resident, claims the remittance basis in 2013-2014 and pays the £50,000 remittance basis charge. Ingrid makes payments on account for 2014-2015, and in anticipation of making a similar claim to the remittance basis pays £50,000 of the payments on account from her foreign chargeable gains.
When completing her 2014-2015 SA tax return Ingrid decides not to claim the remittance basis. Ingrid has until the 15 March 2016 to take the equivalent funds (£50,000) offshore to prevent a taxable remittance. If she does so the £50,000 taken offshore will be treated as deriving from her foreign chargeable gains, and would be taxable as such if she later remits those funds back to the UK.
Instead of taking the money offshore Ingrid could if she decided to, make a qualifying investment under business investment relief provisions (see RDRM34300 onwards), or a combination of the two.