The Internal Revenue Service (IRS), the tax authority in the US, has issued a Revenue Ruling (Revenue Ruling 2011-19) confirming that US taxpayers can claim credit for the remittance basis charge.
The IRS decision means that “non-dom” US tax payers who are resident in the UK and choose to pay tax on the so-called “remittance basis” can set the annual £30,000 levied by the UK tax authorities for doing so against their US tax bills.
According to the Treasury’s consultation document on the taxation of non-domiciles (PDF 383 KB), around 5,400 individuals paid the remittance change in 2008 / 09. A significant proportion of these are likely to have been US taxpayers.
Dan Crowther, director in the private client advisory practice at KPMG in the UK, said: “This decision by the IRS will be welcomed by the many American non-doms living and working in the UK. Because the US has a system of worldwide taxation, these people were running a risk of effectively being taxed twice on the same income. This sensible and pragmatic ruling should eliminate that situation.”
It is proposed that the £30,000 annual remittance basis charge will be increased to £50,000 for longer term residents from 6 April 2012. It is understood that the £50,000 will also be creditable.
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