UK remittance basis now allowable for US tax purposes

The United States Internal Revenue Service (IRS) has released, in the form of Revenue Ruling 2011-19, the long awaited confirmation that the £30,000 remittance basis charge will be allowable as a credit for US income tax purposes, says Baker Tilly.

According to George Bull, Senior Tax Partner at Baker Tilly, the news will be well received by non-UK domiciled US taxpayers who have been resident in the UK for more than seven out of the last nine tax years and who have elected to use the remittance basis of taxation. Such election allows them to be taxed on non-UK source income and gains only to the extent they are remitted to the UK.  "Up until now, these individuals have faced uncertainty in terms of whether a credit could be claimed against their US income tax bills in respect of the charge," says Bull.
 
Baker Tilly points out that much of the complex legislation which accompanied the introduction of the remittance basis charge in 2008 was the result of efforts by the UK Treasury to ensure that the levy would be recognisable as a tax for US purposes.
 
The comfort provided by the announcement to UK-resident US taxpayers should help UK businesses retain senior US staff who might otherwise leave the UK once they have been here several years. "This is especially significant given the recent proposals to increase the remittance basis charge to £50,000 for longer term residents with effect from 6 April 2012," concludes Bull.