The taxman is contacting UK tax residents claiming a non-UK domicile status, with ‘nudge’ letters about the remittance base charge (RBC).
The remittance basis is an alternative tax treatment available to non-doms, who are residents but not domiciled in the UK and have foreign income or gains.
The letters will be sent to those who have been tax residents in the UK for seven out of the preceding nine years and 12 out of the proceeding 14 years.
Why are the letters being sent out?
HM Revenue & Customs (HMRC) has a strategy of sending targeted communications to taxpayers offering them an opportunity to talk to HMRC less formally and outside the normal enquiry process about their tax affairs.
The letter will state the steps that may be required, whilst allowing taxpayers time to amend their 2020-21 tax returns. It is important that recipients make any amendments to last year’s return within 60 days to avoid a tax enquiry.
What are the costs?
The RBC allows many families living in the UK to reduce the amount of direct taxation they are liable for because they make the bulk of their income abroad. Being a non-dom does incur charges, but these are usually offset by the tax savings.
Data from Self-Assessment returns indicates that there are around 100,000 individuals who benefit from the remittance basis, of whom 65,000 are non-doms who pay the RBC.
The Government levies £30,000 on those who have been living in the UK for at least seven of the previous nine tax years.
Update reinforces RBC guidance
This rises to £60,000 for those who have lived in the UK for 12 of the previous 14 tax years.
The guidance has been clarified making the Residence Domicile and Remittance Basis Manual (RDRM32220) clearer for customers regarding the year count for remittance basis purposes.
The guidance is intended to reinforce the fact that taxpayers must be tax residents in the year of arrival, departure and split year (or both) to count as a year of residence for remittance basis charge purposes.
In addition, updates will be made to the notes that accompany the Self Assessment tax return (SA109) to inform taxpayers prior to them filing their 2021 to 2022 tax returns.
Make note, that even if you are not liable to pay the RBC, if you have not declared any overseas income to HMRC, you must contact them to check if it needs to be declared to avoid being penalised.
For help and advice on non-domicile tax matters, contact our expert team today.
