Tax year end planning: International Matters


Remittance Basis Charge (“RBC”) changes

A number of unexpected changes to the RBC were announced in the 2014 Autumn Statement that will impact UK resident but non-UK domiciled individuals.

From 6 April 2015, individuals who have been resident in the UK for 12 of the last 14 tax years will be required to pay a £60,000 RBC to access the remittance basis; increased from the current amount of 50,000.

In addition, a new £90,000 RBC will be introduced for individuals who have been resident in the UK for 17 of the last 20 tax years, who wish to access the remittance basis of taxation. This will apply for the tax year 2015/16.

There is no change to the £30,000 RBC for individuals who have been resident in the UK for 7 of the last 9 tax years.

Individuals who are approaching the residence criteria to begin paying the RBC, or who will be affected by the new £90,000 charge, should consider altering/accelerating non-UK income or capital gains.

The Government also announced that they will be consulting on changing the ability to elect for the remittance basis annually to the election being fixed for three years. At this stage, this is only a proposal subject to consultation and any changes; if introduced, would only take effect from 6 April 2016 at the earliest.

Click here for informaiton about the Autumn Statement Draft Finance Bill 2015 and non-domiciled individuals.

Secured offshore loan arrangements for non-UK domiciliaries
A reminder that HMRC changed their guidance on secured loan arrangements from 4 August 2014. This change impacts non-UK domiciled individuals who took loans secured against overseas monies/assets and remitted the borrowed funds to the UK.

Previously, loans secured against overseas monies/assets and brought or used in the UK were not viewed as a remittance. However, the new guidance confirms this is no longer the case.

Such arrangements taken out from 4 August will therefore be treated as a taxable remittance of the collateral used as security.

Existing arrangements, set up under the old guidance as at 4 August, will not be grandfathered; however, providing the taxpayer notifies HMRC by 31 December 2015 that either the loan remitted to the UK will be repaid or alternative “clean” security for the loan is put in place by 5 April 2016, no remittance will be deemed to have been made. Yet, it is important to consider the source of any funds used to repay an existing loan as that may itself trigger a taxable remittance.

There are limited opportunities to re-arrange financing in an appropriate manner whilst avoiding a tax charge – early planning to mitigate the tax costs is recommended.

Click here for information on non-UK domiciled individuals and secured loan arrangements.

Stock options for internationally mobile employees
New legislation will come into effect from 6 April 2015 to change the way unapproved employment related share income, such as stock options, will be taxed.

This will impact those employees who have spent some time working internationally, including those who have worked in the UK and overseas. The new rules align the UK tax treatment with international tax practice but there will be some winners and losers.

The share gain will be subject to UK tax if the employee spends some time between the grant and vesting working in the UK.

It may be possible in certain circumstances to exclude the portion of the gain that was spent working overseas, but careful consideration will be required.

Click here for information on employment related securities and security options.