Tax Guide: UK Tier 1 Investor programme – UK Tax Issues 1 - Page 3

steps , to be undertaken before UK residence begins . Such steps need to be implemented with care to ensure that being a remittance basis user is as taxefficient for the individual as possible .
4 . Remittance basis The concept of " remittance " is wider than might be assumed , and great care needs to be taken to avoid inadvertent remittances . A remittance can occur not only through actions of the remittance basis user himself , but also through the actions of certain related persons ( which the remittance basis legislation calls " relevant persons "). Moreover , payments occurring outside the UK can trigger a remittance if there is some connection with the UK – for example where the payment is in respect of a loan which has been used in the UK , or is in respect of a service which has been provided in the UK .
The remittance basis provides for foreign-sourced income ( and , in the case of nondomiciled individuals only , foreign sourced gains ) to be charged to tax by reference to the extent to which they are remitted to , or received in , the UK . Where the remittance basis applies , it allows the taxpayer to defer tax on foreign income or gains that have arisen until amounts in respect of those income or gains are received in the UK ( if they ever are ). It does , however , have to be shown that what is received in the UK is ‘ in respect ’ of that income or gain .
Once the first seven years of tax resident in the UK has elapsed , individual has the option to be taxed on arsing basis ( pay tax on world-wide income and gains ) or to be taxed on remittance basis .
If the individual opts to be taxed on remittance basis after the first seven years of resident in the UK ( long term resident ), the individual will be required to pay a remittance basis charge for each tax year he wish to claim the remittance basis of taxation . The remittance basis charges ( RBC ) are currently as follows :
1 . £ 30,000 per annum for individual who have been UK resident for seven of the previous nine tax years ( i . e . it applies from the eighth consecutive tax year of UK residency ).
2 . £ 60,000 per annum for individual who have been UK resident for 12 of the previous 14 tax years ( i . e . it applies from the thirteenth consecutive tax year of UK residency ).
3 . £ 90,000 per annum for individual who have been UK resident for 17 of the previous 20 tax years ( i . e . it applies from the eighteenth consecutive tax year of UK residency ).
Please note that the government has proposed to abolished ( 3 ) above . It is proposed that non-UK domiciled individuals who have been UK resident for 15 of the previous 20 tax years will be deemed to be UK domiciled for all tax purposes ( i . e . this will apply from the 16th consecutive year of UK residency ).
5 . Pre-arrival advice It is important to seek advice prior to arriving in the UK . The UK tax year runs from 6 April to the following 5 April , and there are more planning options available