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Tax Tip

Residence And Domicile - Day counting rules

On or after 6 April 2008 any day where an individual is present in the UK at midnight will be counted as a day of presence in the UK for resident test purposes.

There will be an exemption for passengers who are in transit between two places outside the UK. For example, individuals might fly into the UK and leave by train or ferry. As a concession, if they are in the UK at midnight, they will not be counted as being in the UK for a day for the purposes of the residence test, so long as they did not engage in activities in the UK.

Annual £30,000 charge for some users of the remittance basis

Currently UK residents over the age of 18 who are either not domiciled or not ordinarily resident in the UK can access the remittance basis of taxation without any UK tax being charged on the foreign income and gains that are left outside the UK. Thus remittance basis means that income and gains arising overseas are only taxed in the UK when they are brought into the UK.

From 6 April 2008, non-domiciled and/or not ordinarily resident adults, who have been resident in the UK more than seven of the past 10 years, will have to pay a £30,000 annual tax charge in respect of the foreign income and gains they leave outside the UK. It does not apply if their remitted foreign income and gains are less than £2,000.

This £30,000 charge is in addition to any tax on UK income and gains or foreign income and gains remitted. Individuals paying the charge can choose what un-remitted income or gains the £30,000 is paid on, and those income/gains will not be taxed again if and when they are eventually remitted to the UK.

Personal allowances and the remittance basis

On or after 6 April 2008 individuals who claim the remittance basis, unless they have un-remitted foreign income and gains of less than £2,000 a year, will not be entitled to any of the personal income tax allowances. This includes the basic personal allowance and age-related allowances, blind person's allowance, tax reductions for married couples and civil partners and relief for life assurance payments.

Remittance basis users will also lose access to the annual exempt amount for capital gains.

Individuals can choose each year whether they want to be taxed on the remittance basis or on their worldwide income and gains. In any year when they choose the latter they will be entitled to the personal income tax allowances and the annual exempt amount for capital gains.

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