Nominated Account Print
When an individual claims the remittance basis, and has to pay the RBC, he has to nominate the income or gains on which he is paying the RBC and has to include a note of the bank, sort code or equivalent, and account number on his Tax Return to identify the source. Due to the adverse tax consequences of remitting the nominated income to the UK the usual advice is that the nominated income should be a minimal amount, but not less than one whole GBP. This is because in practice it will not be possible to remit the income on which the RBC has been paid without triggering deeming provisions which are likely to prove very detrimental in the future.
The nominated account should be ring-fenced, and no part of it should ever be remitted to the UK before all other remaining offshore funds have been brought into the UK. Where a remittance of funds on which the RBC has been paid is made to the UK, this will trigger unwanted penal consequences.
In the event that income is remitted to the UK from the nominated account, then subject to the de-minimis limit discussed below, the normal matching rules for remittances are disapplied, and a new set of deeming rules come into effect. These deeming rules are designed to deter a remittance basis user from remitting nominated income or gains to the UK.
Firstly, all remittances made by an individual for all years he was a remittance basis user going back to 2008/09 are re-categorised. To the extent that the individual had overseas income or gains arising in the years up to and including the year of the remittance of the nominated income, then the amounts remitted to the UK are deemed to be made out of that income and gains irrespective of whether clean capital had been remitted here. For an individual who has followed the rules regarding segregation of capital from income and gains, and only remitted capital this could trigger a substantial tax charge. All future remittances of untaxed foreign income or gains are treated in much the same way until such time as the individual has remitted all income and gains arising since 6th April 2008 up to and including the year of remittance of the nominated income. For this reason, none of the nominated income or gains should ever be remitted to the UK before all other income and gains have been remitted here. This cannot be stressed too strongly.
The above re-categorisation rules do not apply in respect of the first £10 of nominated income remitted to the UK in any year. This prevents the draconian deeming provisions from biting where an amount of nominated income has been inadvertently brought into the UK.
The individual should keep an accurate record of remittances made to the UK so that, if required, he can demonstrate that no part of the nominated income has been remitted to the UK. As mentioned above, an individual who has substantial offshore income or gains, it is probable that he will never actually be in a position to remit the income or gains on which the remittance basis charge has been paid.
Long-term UK residents should not remit funds from the nominated account even once they have been resident in the UK for more than 15 out of the past 20 tax years as the deeming rules above will still apply in respect of prior years’ remittances.