The UK offers a beneficial taxation regime for certain individuals who move to the UK. This beneficial treatment is available to Indian and other non-domiciled individuals resident in the UK.
Broadly speaking a non-domiciled individual is someone who was born abroad with a foreign father, and does not intend to stay in the UK permanently or indefinitely.
All UK residents, irrespective of their domicile status are subject to UK tax on UK sourced income and gains. However non-domiciled individuals can be taxed on the remittance basis of taxation meaning that foreign income and gains are only taxed when remitted to the UK.
An individual is not taxed on any ‘clean’ capital remitted to the UK. Clean capital refers to all income, profits, earnings and gains realised before becoming resident in the UK and includes gifts received before and after arrival in the UK.
Careful planning can help non-domiciled individuals live tax efficiently in the UK through funding their UK lifestyle using clean capital whilst using foreign income and gains to fund their overseas lifestyle such as the maintenance of foreign homes etc.
An individual is able to access the remittance basis free of charge for the first seven years of residence, once an individual has been UK resident for seven out of the last nine tax years an annual charge of £30,000 applies which increases to £50,000 (£60,000 from 6 April 2015) once the individual has been resident for 12 out of the last 14 tax years, rising to £90,000 (from 6 April 2015) when resident for 17 out of the last 20 years.
The concept of the remittance basis of taxation is simple but determining what constitutes a remittance and how the remittance is taxed is more complex and professional advice is recommended.
A remittance is not limited to transferring funds from an offshore account to a UK account but also includes settling debts incurred in the UK, purchasing an asset abroad then bringing it to the UK and gifts of offshore funds to certain persons (such as spouses or minor children) who then bring them to the UK.
With the recent press on non-domiciled status and the upcoming general election, we are likely to see changes to the remittance basis legislation over the coming few years.
Simon Simpson is a Tax Director in the International Private Wealth Team at BDO with over 20 years’ experience specialising in the taxation of high net worth individuals (HNWIs) with complex and varied affairs often across multiple jurisdictions. Simon is a member of the Chartered Institute of Taxation and advises on tax efficient structures to assist in creating and maintaining family wealth, exit and remittance strategies and the tax implications of inbound and outbound migration as well as the more general UK taxation of wealth.