International aspects of personal taxation for ATX-UK

Part 3 of 4

This is the Finance Act 2023 version of this article. It is relevant for candidates sitting the ATX-UK exam in the period 1 June 2024 to 31 March 2025. Candidates sitting ATX-UK after 31 March 2025 should refer to the Finance Act 2024 version of this article (to be published on the ACCA website in 2025).

So far in this article we have looked at residence and domicile and the taxation of overseas investment and trading income and employment income. We are now going to look at the remittance basis.

The remittance basis

A UK tax resident individual who is neither domiciled nor deemed domiciled in the UK may choose to be taxed on overseas income and chargeable gains on the remittance basis. In some circumstances, the remittance basis is automatic.

Under the remittance basis, amounts are subject to UK tax only if they are brought into the UK. For example, an individual with overseas bank interest would not be liable to UK income tax (IT) on that interest if he could show that it has not been brought into the UK. This could be achieved by, for example, showing that it has not been removed from the overseas bank account.

A remittance is regarded as having been made where money or other property derived from offshore income/gains is brought into the UK.

Individuals who qualify for the remittance basis can choose each tax year whether or not to pay tax on the remittance basis.

You should recall from part 2 of this article that the remittance basis is NOT examinable in relation to overseas employment income.

Figure 5 illustrates the remittance basis divided into three stages. It is useful to think of the rules in stages as it avoids confusion and enables the issues to be addressed in a logical order.

• It is first necessary to consider the tax residence status of the individual in order to determine whether or not the overseas income is subject to UK tax.
• The second issue is whether the remittance basis is available.
• Finally, if the remittance basis is available, the need to pay the remittance basis charge (RBC) must be considered.

Figure 5 – The remittance basis

EXAMPLE 1 – Adele
Adele came to the UK in 2022/23 but did not become tax resident until 2023/24. She is domiciled outside the UK and is not deemed domiciled in the UK. Adele has employment income in respect of her job in the UK and interest arising on an overseas bank account of £4,000 per year. Adele’s liability to UK IT is as follows:

• Her employment income is in respect of UK duties. Accordingly, it will be subject to UK IT in both 2022/23 and 2023/24.
• In 2022/23, the overseas bank interest will not be subject to UK IT as Adele is not tax resident in the UK.
• In 2023/24, Adele is UK tax resident and will be taxed on her overseas bank interest as well as her UK source employment income. However, she can claim to be taxed on the remittance basis as she is neither domiciled nor deemed domiciled in the UK. There will be no need for Adele to pay the RBC as she has not been UK tax resident for seven of the nine tax years prior to 2023/24.

Conclusion

You need to be able to explain the taxation of overseas income in a logical manner, starting at the beginning of the story in the same way as the diagrams in this article. It is important to note that if an individual is not UK tax resident, overseas income will not be subject to UK tax, such that there is no need to consider the remittance basis.

Written by a member of the ATX-UK examining team

The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and the ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.