Tax-free remittances into the UK!

There is still time to take advantage of the relaxed remittance basis rules that will expire after 5th April 2019.

If you have income or gains in an offshore account that has previously been taxed in the UK, then this can be remitted into the UK free of tax.  However, offshore income and gains that have not been subject to UK tax will incur a UK tax liability if they are remitted into the UK.  Additionally, monies that are considered to be capital in nature can be remitted into the UK free of tax.

As you are likely aware, where taxed income, untaxed income and capital are contained in the same (mixed) account, the normal rules regarding the remittance of monies into the UK are extremely complex.  It can be very difficult, if not impossible, to remit certain monies to the UK without incurring additional UK taxes.

However, up to 5th April 2019 it is possible to make a transfer from one offshore account to another offshore account and nominate the type of income that is transferred. 

This nomination can be capital and taxed income (leaving the original account containing the “unremittable” income), allowing you to remit from the “new” account.  Conversely, you could transfer untaxed income & gains (unremittable) into another offshore account, allowing you to remit from the original account.

HMRC require that you can correctly identify the monies transferred and therefore this need not require that you prepare a full analysis of the monies contained in the account.  The analysis needs to merely identify an amount of untaxed income/gains or capital/taxed income depending upon the strategy you wish to pursue, you can then nominate and do the necessary transfer.

It is likely that some analysis will still be required under the new relaxed rules as transfers to and from the account prior to any planned transfer will be considered under the standard rules.

There are a couple of other points to consider; you can only transfer monies between specific accounts once under the relaxed rules i.e. you cannot make a second transfer to the same account.  Also, if you have ever paid the annual remittance basis charge in a year before 2017/18, your offshore assets can take their cost basis using the FMV of the asset at 5th April 2017.  If you subsequently sell these assets any gain up to 5th April 2017 can be remitted into the UK tax free.

Additionally, any income or gains nominated in “support” of the remittance basis charge can also be remitted into the UK before 6th April 2019 using these relaxed rules.

Please feel free to contact us directly if you would like to discuss this further.