How to file your UK tax return for UK tax residents

If you are a UK tax resident, there are only two ways to file your UK tax return.

Either you are taxed on the arising basis of taxation. This means that your worldwide income and gains are taxed in the UK. As a consequence, even if your foreign income and gains have already been taxed in another country, you will still need to pay tax in the UK and declare all your foreign income and gains. In many cases, relief is given in the UK for foreign tax paid on foreign income and gains under the provisions of an applicable Double Tax Treaty.

To avoid having to pay UK tax on your non-UK income and gains, you may be able to claim that your domicile of origin is not the UK. This may enable you to file your UK tax return as a Resident Non Domiciled individual, claiming the remittance basis of taxation. This means you that you will only be subject to UK income and capital gains tax on all your UK-source income and gains realised on UK assets on an arising basis, but not on any foreign (non-UK) income and gains realised on non-UK assets, unless such income and gains are remitted to the UK.

Foreign income or chargeable gains are treated as being remitted to the UK if you bring them into the UK, for example, by transferring them from an account outside the UK to a bank account in the UK. However, there are other situations in which funds are remitted ton the UK, in some cases without them being physically brought to the UK at all. For example, if non-UK income and gains are used to settle a credit card bill outside the UK, where the credit card has been used to make purchases in the UK, this will be treated as a remittance.

The statutory definition of remittance aims broadly to cover all circumstances in which non-UK income and chargeable gains are used in the UK, so that individuals taxable on the remittance basis cannot avoid UK taxes by structuring their affairs to keep all funds offshore (and outside the UK tax net) whilst enjoying the benefit of them in the UK. A typical example of the wide interpretation of what constitutes a remittance is the payment by a non-dom to his Polish plumber, who carried out works on his UK property, through a wire transfer from his Swiss account to the plumber’s Polish account. Even though no monies have been remitted to the UK, given that the benefit of the service rendered by the plumber on the UK property is enjoyed in the UK, it will be treated as a remittance to the UK.

Please note that this is a very complex areas of UK tax law, and we therefore strongly recommend you get in touch with us to analyse your personal situation if you feel you may be concerned by the above.