Non Domicile remitting savings before 7 year deadline

[roger7777]

As a foreigner, I worked for several years in different countries. In October 2002, I entered the UK for work and claimed a tax status resident, ordinarily non resident (non-domicile). In early 2009, I became a UK citizen. I will be in the UK for 7 years in October 2009 – I understand that at this point I will have to pay 30k pounds remittance basis charge to remit my offshore gains. I do not plan to take this option. Instead, I plan to move all my savings once and for all to the UK.

My savings are of 3 types:
1. Income that was deposited offshore while I worked as a non domicile in the UK. The interest and part of the capital was kept offshore.
2. Savings that I had accrued while working in other countries, prior to entering the UK. The capital and interest have been untouched since I entered.
3. Retirement savings (401k) that I had earned while I worked in the US, which I cannot withdraw without significant penalties, before I am 60.

I do not own any property in the UK.

I have called HMR a couple of times to ask if I have to pay taxes on my offshore savings when I transfer them to the UK, once and for all. I have received conflicting accounts.

My questions are:
1. Can I transfer my capital and interest to the UK without incurring taxes, if I do so before the 7 years are up (i.e. October 2009)?
2. What is the best option regarding my 401k retirement savings? I would prefer to keep them in the US and not pay a withdrawal penalty

[TN]

There are a few things that you seem to have misunderstood:

1. The £30k charge to claim the remittance basis starts if you have have been UK resident 7 out of the preceeding 9 tax years. So if you came here in Oct 2002 and were UK resident for 2002/03, then you will become liable for the £30k charge from 6 April 2009. That is, you are already caught.

2. Now that you are over the seven year limit, you have two choices. Either (i) suffer the £30k charge, and continue to enjoy the remittance basis, or (ii) don't pay the £30k, and all your income and capital gains for the year (and subsequent years if you don't pay the £30k) will be taxable on an arising basis.

If you are planning on bringing back income and/or capital gains which have arisen in previous (remittance basis) years, then you are going to be taxed on them regardless of whether you pay the £30k or not. The £30k only allows you to leave income/gains outside the UK without being taxed on it. It doesn't allow you to bring that money into the UK.

The amounts you can remit to the UK without a tax charge depend on when the income arose, whether you've been taxed on it, and how you have organised your offshore bank accounts.

You need to take professional advice before you do anything, as you might find that you create a tax charge that could be avoided.

Re the 401K plan, since this is a recognised pension plan, I would have thought that there wouldn't be a problem leaving this in the US. Again, advice is required, possibly from a US tax adviser.

Let me know if you require any further assistance and we can arrange a time to discuss.

[roger7777]

Thanks for your response. How do I get in touch?

[TN]

Drop me an email - tristan.noyes@cta.org.uk - with your contact details.

[maths]

In principle I agree with TN's comments but would add the following.

Any monies accrued outside the UK prior to acquiring UK residency may still in principle be remitted to the UK without any UK tax charge thereon
ie monies accrued prior to October 2002.

Whether a straight forward remittance thereof is possible will depend upon whether, subsequent to October 2002, further monies were added to the pre October 2002 bank accounts.

Even for post October 2002 (pre April 2008) non-UK source accrued monies such may still, with planning, be capable of remittance to the UK without UK tax charge depending upon your circumstances.

Any salary atrbutable to your UK duties post October 2002 would in prnciple have been subject to UK income tax and thus such monies could be brought back into the UK UK "tax free".

This a complicated area and the structure of your offshore bank accounts and credits and debits thereto will be crucial to tax UK treatment.

[roger7777]

Thanks Maths. How do I get in touch?