Non-doms to receive ‘nudge’ letters to avoid tax enquiries

The remittance basis is an alternative tax treatment available to non-doms who are resident but not domiciled in the UK and have foreign income or gains.

Now the taxman is contacting UK tax residents claiming a non-UK domicile status, with ‘nudge’ letters about the remittance base charge (RBC).

The letters will be sent to those who have been tax resident in the UK for seven out of the preceding nine years and 12 out of the proceeding 14 years.

A ‘less formal’ approach

HM Revenue & Customs (HMRC) has a strategy of sending targeted communications to taxpayers and offering an opportunity to talk to HMRC less formally and outside the normal enquiry process.

The letter will state the steps that may be required, 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 of RBC?

The RBC allows many families living in the UK to not pay direct taxation 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.

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 resident 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 2021/2022 tax return.

Help with declaring overseas income

Even if you aren’t liable to the RBC, if you are non-domiciled in the UK and have overseas income that you haven’t declared to HMRC get in touch to check if it needs to be declared.