Non UK domiciled employees and the £30,000 tax charge

Many Non UK domiciliaries come to the UK to work -- what impact do the new remittance tax rules have on them? Well in most cases the new rules will have no effect on them. If they perform their duties of employment in the UK they will be subject to UK income tax on the earnings from that employment. This would usually also the case even if they perform some of their duties overseas. There is though one exception to this. Where an employee is UK resident and ordinarily resident but is of foreign domicile, works for a foreign employer and performs all duties outside of the UK the overseas salary can qualify for the remittance basis. It's a strict requirement as not only do you need to work for a foreign employer (which is defined as a non resident employer) you would also need to perform all of the duties overseas (aside from any 'incidental' UK duties). This has led to the practice of split contracts where the employment is effectively divided into two, with the UK duties being subject to one contract of employment, and the overseas duties being in another contract of employment. The Revenue now take a very close interest in this arrangement and would look to see evidence of a genuinely separate employment. Even if the remittance basis could in principle apply as you work for a non resident employer and carry out your duties overseas, after 6 April 2008 you would still be subject to the new remittance tax rules. This means that on first arriving in the UK a non dom employee could claim the remittance basis and avoid UK income tax on the overseas employment income. The only drawback in most cases would be the loss of the UK personal allowance and capital gains tax exemption. If they remain here for more than 7 tax years they would then need to consider whether to continue claiming the remittance basis or not. Unless the overseas employment income that was not brought to the UK exceeded around £81,000 it would not be worthwhile claiming the remittance basis and paying the £30,000 annual tax charge. Instead they'd be better off being taxed on the arising basis and being subject to normal rates of UK income tax on their earnings.