If you create a UK debt (that is, a debt in respect of something which is used or enjoyed in the UK) and then pay that off using foreign income, that is a remittance. If you give money to someone else who then uses that money to buy goods and services in the UK for you or a relevant person, that is also a remittance.
What is a money remittance service?
Under federal law, a remittance transfer provider is a business that transfers money electronically for consumers to people and businesses in foreign countries. These companies include many money transmitters, banks and credit unions, and possibly other types of financial services companies.
How is remitted income taxed?
If you’re taxable on the remittance basis, you’re liable to UK tax on dividends paid by foreign companies that are ‘remitted to the UK’ at the normal tax rates (currently 20%, 40% and 45%) and not at the special rates applicable to dividends (currently 7.5%, 32.5% and 38.1%).
What do you need to know about the remittance basis?
Remittance basis 2019 (HS264) This helpsheet is for individuals who pay tax on the remittance basis. It provides information to help you complete the ‘Foreign’ pages of your tax return and must be read together with the ‘Foreign notes’.
How is Jenny taxed on a remittance basis?
If you only remit part of a particular amount of foreign income, you can only claim credit for the same part (the proportionate share) of any admissible foreign tax that may have been deducted from that income. Jenny is taxable on the remittance basis and is liable to UK tax at the rate of 40%.
Do you have to pay tax on remittances?
Yes, though different countries have different rules. This is especially true for businesses remitting payment, though individuals are subject to taxation as well, cited as a “ non-business tax remittance” according to the OECD. Since the remittance is a form of income, whether compensation or a gift, it must be noted on federal tax returns.
When do you lose the remittance basis of taxation?
20 tax years immediately before the relevant tax year. An individual meeting one or the other of these conditions will be deemed UK domiciled and lose the ability to claim the remittance basis of taxation. This factsheet is based on law and HMRC practice at 1 July 2019.
