Summer time and the remittance is easy
US taxpayers living in the UK have had some good news this summer. The US Internal Revenue Service (IRS) has ruled that US taxpayers who pay the UK annual £30,000 remittance basis charge can use it to reduce their tax bill in the US.
Paying the remittance basis charge ensures that non-doms who have been living in the UK for at least seven years only have to pay tax on foreign capital gains and income that they bring into this country. If they choose not to pay the charge, they receive a UK tax bill covering their worldwide capital gains and income.
The charge has been of particular concern for US citizens who are resident but not domiciled in the UK, as they are also subject to US tax on a worldwide basis. It has not been clear whether they could offset the £30,000 charge paid in the UK against actual tax due on income or gains in the US.
These unlucky US citizens have effectively been suffering double taxation, as they were paying £30,000 to avoid being taxed on their worldwide income and capital gains in the UK, while simultaneously being taxed on their worldwide income and capital gains in the US.
The IRS ruling that the remittance basis charge is a tax within the meaning of the US taxation code removes this uncertainty and confirms that paying the £30,000 charge will reduce the US tax liability for US taxpayers living in the UK. This ruling will also presumably extend to the £50,000 charge which is being introduced from April next year for UK resident non-doms who have been living here for at least 12 years.
For further information please contact Andrew Goldstone.