Tax Tip of the Month
December 2009/ January 2010
Get round the 'remittance basis'
When they changed the rules on non-UK domiciliaries to introduce the £30,000 charge, the mandarins of the Revenue took the opportunity to close a large collection of loopholes that had been built up over the years by people looking to get round the ‘remittance basis’.
If you were (and, indeed, are) taxable on the remittance basis as a non-UK domiciliary, effectively, there were a number of ways to remit income and gains to the UK without triggering a remittance for tax purposes.
One of these loopholes, which has only partially been closed, was making gifts to close relations overseas. A tax case, which was heard quite recently, confirmed that this planning worked: a man gave a large sum of money to his wife, who then brought the money (or rather what it bought) into the UK. Because it the man did not make the remittance himself, it wasn’t taxable. The Revenue has restricted this by listing out a category of individuals who are closely related, for example spouses and children, for whom a remittance will still be treated as being made. However, more remote relations and people who are not related at all can still be used in this way, providing there aren’t devious arrangements behind the scenes for the money to return to the donor. For a list of these more remote relations, see the Revenue’s website!
