Overseas Aspects for Individuals Pt2 Flashcards
(38 cards)
basis of assessment for income tax?
individuals are taxed under either arising basis of remittance basis
depending on their residence and domicile
arising basis?
individual will pay UK income tax at normal rates on worldwide income for tax year in which income arises
remittance basis?
non-domiciled UK resident pays UK income tax on UK income for the tax year in which the income arises
only pays UK tax on foreign income when remitted (brought) to the UK
basis of assessment for IT if UK resident & domiciled?
UK income = arising
overseas income = arising
basis of assessment for IT if resident, but not domiciled?
UK income = arising
overseas income = possible remittance
basis of assessment for IT if not resident in UK?
UK income = arising
overseas income = not taxable
non-UK resident individuals?
only taxed on their UK income
generally not entitled to a personal allowance
remittance basis applies automatically to who?
non-domiciled UK resident if they have unremitted foreign income/gains below £2,000 in the tax year
(only taxed on the £2,000 when brought to UK)
what happens if remittance basis applies automatically to a non-domiciled UK resident?
they remain entitled to a PA
overseas income is taxed only when remitted to UK
if remittance basis does not apply automatically…
individual will be taxed on arising basis
unless an election is made to use the remittance basis
does remittance basis apply to just income or gains?
both
if remittance basis is claimed (rather than applying automatically) what happens?
individual will not be entitled to a personal allowance
how is remitted foreign income taxed?
always taxed as non-savings income (regardless of whether RB applies automatically or claim is made)
therefore savings allowance and dividend allowance cannot be used against remitted foreign savings/dividends
what happens to personal allowance when one elects for remittance basis?
no PA is applicable
all relevant income is taxable
remittance basis charge?
if non-domiciled UK resident has claimed remittance basis, and is over 18, an annual remittance basis charge (RBC) may apply
what is the RBC amount?
RBC of 30,000 if individual has been resident for 7 of the last 9 tax years
RBC of 60,000 if resident for 12 of the last 14 tax years
once resident for 15 or more years, individual is deemed UK domicile
how does DTR work for income tax?
UK resident individual is liable to income tax on worldwide income, but overseas income be be liable to IT overseas also
to avoid a double tax charge, DTR is available
two types of DTR?
for IT
- double tax treaty relief
- unilateral relief
double tax treaty relief?
relief may be given via exemption method
i.e. income will be exempt in one of the countries
unilateral relief?
- the overseas income is included gross in the UK income tax computation under UK income tax rates as normal
- then a tax credit is given
tax credit for unilateral/credit DTR?
lower of:
- UK tax on overseas income
- foreign tax suffered on overseas income
when there is multiple sources of foreign income, what happens?
- calculate UK IT liability (before DTR)
- copy calculation, but exclude overseas source of income suffering from highest overseas tax rate
- recalculate the UK IT liability - the difference between this and step 1 liability is the tax on the excluded overseas income
- copy calculation from step 2, but then exclude the source of overseas income with the next highest rate of tax
- recalculate UK IT liability - the difference between this and step 3 is the UK income tax on that particular source
repeat the steps until all overseas income is covered
basis of assessment for CGT?
individuals are taxed either under arising or remittance basis
depending on their residence & domicile
arising basis for CGT?
UK resident will pay CGT at normal rate on worldwide gains for the tax year
AEA is available
