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Where Taxpayers and Advisers Meet

Is remmitance basis on accrual or cash basis?

nordman
Posts:7
Joined:Thu Dec 24, 2020 3:06 am
Is remmitance basis on accrual or cash basis?

Postby nordman » Wed Jan 20, 2021 9:18 pm

I became UK tax resident mid-year and have a sole trader activity conducted abroad and accounted as cash basis.
Shall I follow the same accounting basis from a UK perspective? am I free to choose another accounting basis which is more beneficial in case of the remittance basis?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Is remmitance basis on accrual or cash basis?

Postby maths » Thu Jan 21, 2021 2:00 am

It is in HMRC's view practically impossible whilst UK resident to run a sole readership business so that the trading income has a foreign source.

In short, in such circumstances the trading income does not qualify for remittance basis treatment.

nordman
Posts:7
Joined:Thu Dec 24, 2020 3:06 am

Re: Is remmitance basis on accrual or cash basis?

Postby nordman » Thu Jan 21, 2021 11:26 am

It is in HMRC's view practically impossible whilst UK resident to run a sole readership business so that the trading income has a foreign source.

In short, in such circumstances the trading income does not qualify for remittance basis treatment.
During that year, I was French treaty resident. The DTA says:
- article 3.k "the term “business” includes the performance of professional services and of other activities of an independent character."
- article 7.1 "The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein."

My understanding is that the sole trader activity conducted in France is taxable there, but as soon as I become UK tax resident only, I will be liable to declare it in the UK as part of my global income. Is my reading correct?

If my reading is correct, can I declare it to UK based either on accrual or cash basis?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Is remmitance basis on accrual or cash basis?

Postby maths » Fri Jan 22, 2021 2:19 am

My understanding is that the sole trader activity conducted in France is taxable there, but as soon as I become UK tax resident only, I will be liable to declare it in the UK as part of my global income. Is my reading correct?
Yes.

If my reading is correct, can I declare it to UK based either on accrual or cash basis?

Yes.


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