Residency Certificate & The UK Remittance Basis Tax Charge

Simon Misiewicz

Expat & Property Tax Specialist

26th August 2020

UK tax residency certificate

Foreigners and expats that move to the United Kingdom may benefit from a UK tax residency certificate. One key benefit of this certificate is tax relief from taxes paid in a foreign country. UK taxation may be avoided with careful planning. What amount of tax could you avoid?

Foreigners and expats looking to live in the United Kingdom can apply;u for a UK tax residency certificate if:

– They are UK tax residents

– There is a Double Taxation Agreement (DTA) with the applicable country and the UK

A tax refund from HMRC is possible if you have paid taxes in an overseas country and the UK.

When you apply for the tax residency certificate, you must tell HMRC:

– why you need a tax residency certificate
– the double taxation agreement you want to claim under
– the type of income you want to make a claim for and the relevant income article
– the period you need the tax residency certificate for, if different from the date of issue

if needed by the double taxation agreement, confirmation that you’re:
– the beneficial owner of the income you want to claim for
– subject to UK tax on all of the income you want to claim for

To apply for a tax residency certificate:

– you can use the online service to obtain a UK tax residence status

email a form (you will not need to sign in to an online account)

– if you’re an agent applying on behalf of an individual or sole trader, you can apply online

We will know ow need to focus on the benefits of the UK remittance basis for tax purposes.

UK tax residency certificate and the remittance basis charge

As property accountants serving thousands of UK landlords that purchase buy-to-let properties, we know that moving home is stressful. This is certainly increased when your home is in another country like Hong Kong, America or the Middle East. Foreigners and expats must know taxes in their home country and the UK.

The stress levels can be enhanced when you talk about moving countries and working out the different tax elements.

I appreciate we are discussing the subject of a UK tax residency certificate when someone is leaving the UK. However, it does not hurt to remember the UK personal income tax that needs to be considered in the UK.

We must consider people moving from the UK to another country and those living outside the UK but still investing in UK buy-to-let properties.

It is important to note that the UK tax system is based on a fiscal year. A fiscal year runs from 6th April to the following April.

It is possible not to be taxed on your worldwide income when moving to the UK but use the remittance basis instead. This is a great tax strategy for many foreigners & expats that wish to live or invest in the UK.

Having a UK tax residency can impact the money sent to the UK based on the remittance basis tax charge, which needs to be reviewed by all foreigners and exports.

UK Tax Residency | International currency Exchange | Landlords & Property Investors | HMRC UK Remittance Basis Tax Charges for international transfers | Taxation matters, make sure you plan ahead, what tax will you pay?

Remittance basis charges of worldwide income

You have a choice in the UK of how you are taxed. You can be taxed in the UK on worldwide income or just the income that is generated in the UK, referred to as the UK remittance basis.

If you decide only to pay tax on the UK income, you will be called a “Remittance user” and may need to pay penalties as follows based on the number of years as a UK resident. If you choose to pay tax on just UK income, then there may be a remittance basis charge, which you will pay

– £30,000 if you’ve been here for at least 7 of the previous 9 tax years

– £60,000 for at least 12 of the last 14 tax years

You will be taxed on your worldwide income once you have been in the UK for 15 years. Leaving the UK in the fourteenth year may be a good opportunity. The remittance basis charges are a hefty fine to pay. You need to decide if you should be taxed on worldwide income instead.

For many people earning a lot of money abroad, it is worth paying the high remittance basis charges rather than being taxed on their worldwide income.

ensure you get tax advice to discuss the remittance and UK remittance basis charges when moving to the UK.

UK Tax Residency | International currency Exchange | Landlords & Property Investors | HMRC UK Remittance Basis Tax Charges for international transfers

UK tax residency status and considerations for foreigners & expats

We now focus on the UK tax residency and the remittance basis charge.

You need to consider when you move to the UK, the timing could be critical when it comes to tax planning. Not only do you need to consider the tax implications of moving to the United Kingdom, but, you also need to consider the exit tax charges from the country you are leaving. This may be in the form of:

– Income tax due on the earnings to date

– Capital Gains Tax on assets that you decide to sell whilst moving to the UK

You are automatically a UK resident if you:

– stay in the UK for 183 days or more, b) have a home in the UK, c) carry out full-time work within the UK.

You are automatically a non-UK resident if you:

– a) spend less than 16 days in the UK or

– b) not a UK resident in the UK for the past three tax years and spent less than 46 days in the UK in that three-year period or

– c) work abroad for more than 35 hours per week.

If you are a UK resident, you must decide whether to be taxed on your worldwide income or on the remittance basis of how much money you bring into the country.

Foreigners & expats looking to live or invest in the UK must be aware of the automatic residency tests before moving. Ensure you get the right tax advice to pay the least tax using the remittance basis or declaring worldwide income.


What is paying tax on a remittance basis?

Who has to pay the remittance basis charge?

The charge is only applicable to individuals who have been resident in the UK for a certain period of time, typically at least seven out of the previous nine tax years. Once an individual has been resident in the UK for this length of time, they may have to pay the remittance basis charge in order to continue to use the remittance basis of taxation.

Can you switch between arising and remittance basis?

Yes, in the UK, it is possible to switch between the arising basis and the remittance basis of taxation. However, the rules governing switching are complex, and it's important to seek professional advice before making any decisions.

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