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Currently all UK resident individuals are eligible to claim a personal
allowance for income tax purposes and an annual exemption for capital gains
purposes. From 6 April 2008, if a non domiciled individual or an individual
who is not ordinarily resident, claims to be taxed on a remittance basis –
in other words, income and gains arising overseas are taxed in the UK only
when, and if, they are brought into the UK - then these allowances are
forfeited. In addition, any age-related allowances, blind person’s
allowances, tax reductions for married couples / civil partners and relief
for life insurance payments that increase the personal allowance are also
lost.
There is a lower limit under which the loss of these allowances will not be
applicable. So, if the individual claiming the remittance basis has
unremitted foreign income and gains of less than £2,000 in any one tax year,
they will be able to retain access to any of the personal income tax
allowances and the annual exemption.
As individuals who currently have access to the remittance basis can choose
each year whether they wish to claim the remittance basis of taxation or pay
tax on their worldwide income and gains, they will be entitled to the
personal income tax allowances and the annual exemption for capital gains in
a particular year, if they do not claim the remittance basis in that year.
Our view
While the loss of these allowances and exemptions may impact negatively
on some tax payers, it is anticipated that for the majority of
individuals claiming the remittance basis, the additional tax due on the
loss of these allowances will be compensated for by the benefit of being
taxed on the remittance basis. |
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