Taxed on future remittance or not? Paying tax twice? Very confused

Taxed on future remittance or not? Paying tax...

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I would really appreciate help with clarifying something, I am going round and round in circles in my head with all the rules and getting nowhere.

Situation: Uk resident with foreign income, taxed always on arising basis up to year 2013-2014. Has foreign income in 14-15 of 3k and will be taxed on arising basis too.

Needs to remit money before April 5th from an account that contains 2014-15 foreign income. (This will of course not have been taxed yet).

Question: if he remits money from this account (a mixed fund? that contains already taxed "on arising income" up to April 14 and untaxed arising up to April 15), does he need to pay tax on it on remittance? I mean, paying tax on it twice, once on remittance in March 2015 and once when declaring it as global income on the SA form for 14-15?

If so, is the solution to split the money into two accounts before April 5th, or is it too late due to the Last in First Out principle?

Thanks so much for any enlightenment on this!

Replies (5)

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By cohen
03rd Feb 2015 08:07

If the taxpayer is taxed on the arising basis, then there's no need to claim the remittance basis.

Remittance basis is available if you include a claim for it on your tax return.

See the HMRC helpsheet https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323623/hs264.pdf

The remittance of 14/15 income will presumably be taxed on the arising basis in 14/15, and so there's no need to apply the remittance basis to this.

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By muze7
03rd Feb 2015 20:06

thanks

Thanks, that is what I thought. But my tax advisor (who has international experience) says differently. Hence my confusion.

He says it is because of the last in, first out principle that you need to pay tax on it (even if on the arising basis for that year). And HMRC cut off my call twice when I tried to ask. (I need to be very certain about this).

thanks

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Replying to Trish Baillie:
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By cohen
03rd Feb 2015 20:16

Well yes, you'll pay tax on your overseas income, but in the absence of a claim for the remittance basis, it will be on the arising basis. I'd recommend talking it through with your adviser, and clarifying this, as they will be more familiar with your affairs than anyone on here.

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By IslingtonAccountant
04th Feb 2015 10:51

Is the individual non-domiciled?

The domicile status is not mentioned. If UK-dom then the remittance basis is not an option and shouldn't be considered.

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By muze7
04th Feb 2015 14:46

update and thanks to all

Hi Graeme and Cohen,

Yes, non-dom. To update: I asked HMRC today and they stated what you also stated, that tax will just be due once on Jan 31 2016, whether on arising or on remittance basically.

So it is great that that is clear.

 

I also asked about Capital gains from foreign sources, as I was not sure whether you need to declare them even if they are lower than the annual CGT allowance (I realise that if you claim the remittance as non-dom, you should leave less than 2k overseas, as you lose the allowance otherwise).

 

Because the HRMC website says:

Sometimes you need to report to HMRC even if your gains are below the tax-free allowance. Send a tax return if:

you disposed of chargeable assets with an overall worth of more than 4 times the tax-free allowance - this works out as £43,600 for the 2013 to 2014 tax yearyou have losses that you want to claim (if you’re not already registered for Self Assessment, you can write to HMRC instead)If you don’t have anything to report

You don’t need to do anything if you’re not registered for Self Assessment.

If you’re registered for Self Assessment you must still fill in the capital gains section of your tax return. To do this:

confirm that you need to complete the capital gains section in ‘Tailor your return’in the ‘Details of chargeable assets…’ page select ‘No’ for each question - you won’t need to report anything else about your capital gains or losses

I asked about this, since he had not done that, and the answer was he should not have had to.

But what if the HMRC advisor does not give the right advice? Can you then refer back to the original call that you made and say you were given such and such advice?

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