Residence, domicile and the remittance basis

As business becomes ever more global and the workforce more mobile, accountants will often need to consider issues such as residence, domicile and the remittance basis


The statutory residence test was introduced from 6 April 2013.

Previously, it was harder to establish an individual’s residence with any certainty, as it was not included in legislation.

There was a reliance on case law and HMRC guidance, but the Gaines-Cooper case showed that taxpayers could not rely on the latter.

It was largely due to this case that the rules changed and the residency test was finally brought in by the Finance Act 2013.

Similarly, prior to the Finance Act 2008 there was little legislation on the actual definition of a remittance, and thus the approach derived largely from case law principles.

The Finance Act 2008 changed the rules, brought in legislation to deal with it and also introduced a new concept: the remittance basis charge (RBC).

This has been updated and amended subsequently, with the latest changes applying from 6 April 2013, alongside the new statutory residence test; for more information, visit the 'Statutory residence test' section on this page.

How it works

A UK resident is normally taxed on the ‘arising’ basis, which means that all worldwide income and gains will be taxed in the UK, even if foreign income and gains have been taxed in another country.

Often, when this does happen, relief will be given in the UK for the foreign tax suffered. The relief will be through a double-taxation treaty or unilateral relief.

When people come to the UK to work, they can end up being UK resident, but not UK domiciled, and then different rules will apply.

A person who is UK resident but not UK domiciled can choose whether to be taxed on the arising basis or the remittance basis.

If an individual chooses the remittance basis, they will then pay UK tax on all income and gains arising in the UK, plus any income or gains arising outside of the UK, but remitted to the UK.

If an individual chooses the remittance basis, he or she may also be liable to the RBC. This charge is payable in addition to any UK tax due on the foreign income or gains remitted to the UK, and tax due on UK income and gains.

The RBC will be due when the remittance basis is chosen and the individual has been resident in the UK for seven out of the previous nine UK tax years, and has overseas income or gains totalling more than £2,000 in the tax year.

The RBC is £30,000 if the individual has been resident for seven out of the last nine years. However, if the residence has been for 12 out of the preceding 14 UK tax years, the RBC will be £50,000.

Definition of remittance

A remittance is quite broadly defined for these purposes; money or property does not have to be physically imported from overseas for a remittance to occur.

Broadly, a remittance is money or any other property which is, or which derives from, offshore income and gains that are brought to, received or used, either directly or indirectly in the UK for the taxpayer’s benefit or the benefit of another ‘relevant person’.

A relevant person is the taxpayer, his or her partner, his or her children or grandchildren, step-children or step-grandchildren (if under 18).

A close company will also be a relevant person when the individual is also a participator, and trustees, when the individual is a beneficiary of the trust.

For more information, visit the 'Related links' section on this page.