Overseas bank interest

Overseas bank interest

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Client is Pakistani domicile by birth but has lived in UK for years, has a property in which he lives with his children and grandchildren, a UK business.

Can you confirm he is UK domicile by choice? He has been here well over 17 years so the IHT tax rules apply, but can he opt for any overseas interest to be taxed on a remittance basis, or is he deemed UK domicile and taxed on worldwide income and gains?

I haven't spoken about it to my client, but if relevent the tradition is they return home to be buried in the family plot.

Feel free to ask if more info needed.

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By bajones
01st Oct 2014 13:48

remittance basis charge

I'm no expert on the remittance basis, but surely if he has been resident for more than 17 years then he would not get away without paying the £50k RBC, unless the foreign income is under £2k.

Would the foreign income be enough to warrant this worthwhile?

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By User deleted
01st Oct 2014 14:11

We are talking ....

... at it's peak £300pa, he just stuck £25k in a Pakistan bank (circa 2002) so he had funds there to pay for weddings/funerals etc. out there, down to about £5k now.

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By User deleted
01st Oct 2014 14:33

First of all deemed domicile rule is irrelevant for income tax. Before getting in to a discussion of whether or not the client is UK domicile by choice, are you sure he wants to donate £50,000 to HMRC and claim remittance basis??

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Replying to Tax Dragon:
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By paras007
01st Oct 2014 15:11

@taxguru

taxguru wrote:

First of all deemed domicile rule is irrelevant for income tax. Before getting in to a discussion of whether or not the client is UK domicile by choice, are you sure he wants to donate £50,000 to HMRC and claim remittance basis??

 

As bajones pointed out, there is no remittance basis charge if foreign unremitted income is less than 2K.

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By User deleted
01st Oct 2014 15:24

That's the point ...

... he doesn't remit anything, if anything funds go out the UK.

As stated the income is minor, at an educated guess less than £1500 for the whole period, probably nearer £1000, my understanding now is that the RBC will not be payable by him.

What is relevant but not yet mentioned is that it seems if he claims the remittance basis he forgoes his UK personal allowance. As he has UK employment, investment and rental income he needs to suffer the tax for the years involved as the total of that, even if 100% penalty plus interest is charged, will be less than the tax on the loss of just one years PA.

EDIT - been reading further, if foriegn income under £2k then remittance basis is automatic, and PA and CGT exemptions retained, so it looks like two fingers to HMRC - confirmation appreciated before I give the Agincourt salute to them.

(Just hoped the client has "fessed up" fully to me and not "forgotten" to tell me about a source of income!)

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