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Rishi's remittance

There has been a huge amount of press around the fact that Rishi Sunak’s wife, Akshata Murthy, is a “non-dom” and able to access the “remittance basis of taxation”.

In case it isn’t clear this isn’t a tax wheeze that the Chancellor introduced to save his wife a fortune in UK tax. These are tax laws which have been in force for many many years in some shape or form and which are designed to make the UK an attractive place for wealthy individuals to come and live and to invest. Without these rules fewer wealthy individuals would come to live in the UK and it is thought that this would have an adverse impact on our economy, as they would choose to go and live elsewhere instead meaning less taxes overall are collected and less investment is made in UK business. It would also make the UK less attractive to highly skilled workers and global talent if their tax exposure is less outside of the UK. The UK is not the only economy that has special rules like this, with Portugal, Italy, Netherlands and Spain all having special rules in place to attract wealthy individuals and talented individuals to choose to live and work there.

It’s our view that the non-dom rules and the remittance basis of taxation are a vital part of our tax law.

So what does it all actually mean in practice?


Well first things first, before a taxpayer can consider claiming the remittance basis, they need to be considered non-domiciled.

In most other jurisdictions around the world domicile refers to your residency status i.e. where you are currently living and tax resident. In the UK this isn’t the case…

In the UK, domicile is a legal term which is intended to associate an individual with a legal jurisdiction. It is a common law concept.

Broadly, for UK tax purposes, an individual is domiciled in the jurisdiction which he regards as his permanent home. Domicile is distinct from nationality and residence, although these may be indicative of an individual’s domicile status. An individual cannot at any time be without a domicile, nor can he have more than one domicile at the same time.

An exception to this arises where an individual is deemed domiciled in the UK under UK tax law, as their actual domicile can be elsewhere. Typically you are deemed domiciled in the UK if you have been resident here in 15 of the last 20 tax years.

Domicile of origin

An individual’s domicile of origin is determined at birth. It is normally governed by the father’s domicile, but illegitimate children or those born after their father’s death take the domicile of their mother.

An individual’s domicile of origin is difficult to lose and will always continue to apply in the absence of a clear domicile of choice or domicile of dependency being acquired (see below). An individual’s domicile of origin also reasserts itself if a domicile of choice is abandoned or a domicile of dependency ceases (unless a new domicile of choice is established at that time).

Domicile of dependency

The domicile of a dependent person follows and changes with the domicile of the person on whom they are dependent (usually their father). Dependent persons for this purpose are children younger than 16yrs and mentally incapacitated persons. Dependent persons cannot acquire a domicile of choice by their own actions, but their domicile will change if the person on whom they are dependent changes their domicile, e.g. establishes a domicile of choice. When a dependent child reaches 16yrs, his domicile of dependence will typically continue unless it is abandoned in favour of a domicile of choice elsewhere.

Women married before 1 January 1974 were also classified as dependent persons for domicile purposes. They therefore acquired their husband’s domicile on marriage and retain it until his death or divorce (not mere separation), at which time they can continue to retain the husband’s domicile as their domicile of choice or establish a new domicile of choice elsewhere (otherwise their domicile of origin reverts).

Domicile of choice

A domicile of choice can only be acquired if a person takes up residence in another jurisdiction and has a settled intention to make that country and not his domicile of origin his permanent or indefinite home. In practice, this requires an individual to sever all connections with the jurisdiction of his domicile of origin and establish ties in a new jurisdiction. Factors that are likely to be relevant include social ties (e.g. clubs and societies), family ties (especially close relatives), economic factors (e.g. bank accounts, employments), citizenship and private residences.

Credible evidence that an individual intends to return to live in the jurisdiction of his domicile of origin is likely to prevent the establishment of a domicile of choice. Where an individual abandons a domicile of choice (broadly, by ceasing to be resident in the relevant jurisdiction and intending not to return), his domicile will revert to his domicile of origin unless a further domicile of choice is established at that time.

‘Deemed Domicile’

Since 6 April 2017:
- a non-domiciled individual who has been UK tax resident for at least 15 of the previous 20 UK tax years will be treated as domiciled in the UK for all UK tax purposes;
- an individual who was born in the UK with a UK domicile of origin is treated as domiciled in the UK whilst UK resident.

If it is established you have a domicile outside of the UK i.e. you are a non-dom then this means you can access the remittance basis of taxation.

The Remittance Basis

UK resident non-doms can claim to be taxed on the remittance basis of taxation. In essence, this means that the individual’s non-UK source income and gains are not subject to UK tax provided they are received and retained outside the UK.

The income and gains are only subject to tax if they are remitted to the UK. The terms “remit”, “remittance” etc. are very broad and include most ways in which cash or other assets are transferred to the UK or otherwise used or enjoyed in the UK.

Non-doms can choose from one year to another if they wish to be taxed on the remittance basis. Those who choose not to be taxed on the remittance basis will be taxed on their worldwide income as it arises (“the arising basis”).

Claiming the Remittance Basis

Taxpayers need to actively claim the remittance basis for relevant foreign income (broadly overseas investment income and rental income), certain employment income and capital gains made on non-UK assets.

By claiming the remittance basis of taxation the individual will lose their entitlement to UK tax free personal allowances (currently £12,570 for income tax and £12,300 for capital gains per annum). However, it should be noted that individuals with taxable income in excess of £125,000 will not be entitled to a personal income tax allowance in any case (based on todays tax rates and allowances).

It is possible to choose each tax year whether to pay the applicable remittance basis charge, and the decision is made after the end of the tax year. Taxpayers can therefore review their situation from one year to the next and opt whether or not to claim the remittance basis.

Offshore Income and Gains are Less than £2,000

Although clearly not relevant to Ms Murphy’s situation.

There is no need to make a claim where such unremitted income and/or gains for a tax year are less than £2,000 as it applies automatically. However, if completing a tax return, it is necessary to confirm when this applies.

The Remittance Basis Charge

Where an individual has been resident in the UK for some part of at least 7 out of the last 9 tax years immediately before the year in which a claim is made, and wishes to claim the remittance basis, there will be an additional annual charge. This charge is currently set at £30,000 and is effectively treated as if it were tax on certain income or gains of the taxpayer’s as nominated by them and notified to HMRC in making the claim.

Individuals who have been UK tax resident in some part of at least 12 of the previous 14 tax years are liable to pay a charge of £60,000 in order to access the remittance basis of taxation. It ceases to be available one an individual has been resident in the UK for more than 15 of the previous 20 UK tax years.

If she has been UK tax resident for long enough Ms Murphy will no doubt be paying a remittance basis charge to access the remittance basis of taxation.

We are experts in non-dom taxation and the remittance basis, if you would like to discuss how we can assist you please do not hesitate to contact us.