Non-Domiciliaries will no longer be able to benefit from a Remittance Basis concession that allowed them to use unremitted foreign income or gains as collateral for commercial loan arrangements enjoyed in the UK without incurring a tax charge.
Up to now HMRC had accepted that Remittance Basis taxpayers, who obtained a loan secured using foreign income or gains that remains overseas, and remitted part or whole of that loan to the UK, could potentially have been taxed twice on the amount of loan brought to the UK. So, in 2010 the taxman issued a concession whereby loans made on commercial terms, that were regularly serviced from foreign income or gains, would be taxed only on the servicing payments; and not on the use of the underlying collateral.
However, now HMRC says it “is seeing large numbers of arrangements which are not considered to be commercial and not within the intended scope of the concession”, and so have withdrawn the concession forthwith, from today.
However, there is some relief for arrangements set up before today. Affected taxpayers have to notify HMRC where they have used foreign income or gains as collateral for a loan – and have not reported a remittance. HMRC won’t tax those remittances if the loan arrangements were within the terms of the concession if, by the end of this year, the taxpayer makes and fulfils a written pledge that the foreign income or gains security either has been, or will be replaced by non-foreign income or gains security before 5 April 2016; or the loan or part of the loan that was remitted to the UK either has been, or will be repaid before 5 April 2016.
What does this mean for me?
It will only affect you if you are UK Resident who is Non-Domiciled in the UK and pays the Remittance Basis Charge. However, for any Non-Resident or Non-Dom it once again illustrates the extreme complexity of the post-2008 legislation.
How can Lynam Tax Experts help?
Lynam Tax Experts have helped many Non-Domiciled individuals save large sums, by careful analysis of their affairs and the correct application of complex legal principles: which a large number of tax inspectors seem to misunderstand. Dealing with a Tax Residence enquiry or a domicile or remittance disclosure requires specialist knowledge, deep experience and a proven methodology.
If you need more information about this complex issue then phone today for a free, confidential, no obligation discussion. Call:
Paul Lynam : 0845 643 9997 or
Andrew Nutbrown : 0771 877 8710