The remittance basis - how does it work?

[glippiglop]

[Deleted]

[meridian]

Hi everyone,

I'm looking for some general advice on the remittance basis. I own a company in NZ and paid myself a lump sum before coming to the UK, where I am now resident. 80% of that lump sum is now subject to tax on the remittance basis (the money is for working here). This money was remitted in Aug 2005.

Can anyone tell me what taxes am I going to be subject to? I take it I'll pay tax and NIC's on my tax return. But is the company back home now subject to employer's NIC payments too? Will it be penalised for not paying NIC's? Will there be PAYE penalties?

When using the remittance basis, do you pay any interest on unpaid NIC's after April or will it be Jan 31st? Will the HMRC penalise me further for not paying NIC's on account?

I'm hoping that using the remittance basis clears me of all potential issues - I'd be interested in other people's experiences in using the remittance basis so that I can get a better understanding. It's extremely hard to find info on this subject on the 'net.

IANAA, however:
"paid myself a lump sum before coming to the UK" I think is the key phrase here - at the time of payment you were not a tax resident of the UK. As I understand it, only remittances of income are liable to UK taxation, and that that income should be earned at the time that you are a UK tax resident (but not ordinarily resident nor domiciled). If it was remitted in August 2005 but you did not come to the UK until after that then the payment to you is taxable in NZ as income but has changed it's nature to capital by the time you become a tax resident in the UK.
If the lump sum was paid to you personally from your NZ company before coming to the UK, then you will be liable to account for it in your personal NZ return depending on how it has been paid (dividends, salary, or director's fees). Your NZ company will then also be liable for either withholding tax or PAYE, plus possibly ACC at the end of the year if it was wages.

ps the value of my advice is exactly what you've paid for it - I'd suggest you get in touch with a specialist accountant who can deal with the tax resident / non-domicile and double-taxation issues.

[meridian]

Not quite, income is taxed in the country in which the work is performed. The 20% NZ portion is taxable in NZ and becomes capital, but the 80% is income tax taxable in the UK only. The non-resident supplementary pages deal with split years and how to attribute income in this case.

That's not so much the issue for me though. I just haven't done a UK tax return before and I don't know if they'll hit me up for anything (NIC penalties etc) when I attribute this income on the remittance basis. So if anyone else has used the remittance basis for income, I'd just be interested in hearing if National Insurance became an issue to you or the company.

Ah, I see.
You confused me with "paid myself a lump sum before coming to the UK" followed by "the money is for working here". I took the last part to mean that you used it to support yourself while working here, but you seem to mean that it was earned as income here.
Does this mean that you were here originally but the income was paid direct to your NZ company, and you withdrew it whilst back in NZ?

[ASB]

[QUOTE=glippiglop]I was never here previously, but I became resident with my UK passport. /QUOTE]

UK passport does not make you resident. Time does. How many days have you spent physically in the coun try in any givne tax year excluding arrival/departure days.

It might be worth checking you residency status.

[Mickmanus]

You can find the dual tax treaty for New Zealand and the UK at http://www.hmrc.gov.uk/international/newzealand.pdf