In Rev. Rul. 2011-19, the I.R.S. held that the U.K. Remittance Basis Charge (“RBC”) is an income tax for which a credit is allowable under Code §901.
The U.K. generally allows individuals who are U.K. residents but who are not domiciled in the United Kingdom (i.e., do not intend to live in the United Kingdom permanently) (non-domiciliaries) to elect each year to be taxed on an alternative basis. The default basis of taxation for non-domiciliaries – as it is for any U.K. resident individual – is to pay U.K. income and capital gains taxes on their worldwide income and capital gains (gains), which is known as the arising basis of taxation.
The alternative method of taxation is the remittance basis, under which non-domiciliaries with non-U.K.-source income or gains can elect to be taxed on their non-U.K.-source income and gains only when they are remitted to the United Kingdom. Remittance basis taxpayers also are subject to tax on their U.K.-source income and gains, which are taxed in the year in which they arose, under separate statutory provisions applicable to all U.K. resident individuals.
A special rule applies to U.K. residents who are non-domiciliaries age 18 years or older and who were U.K. residents in at least seven of the prior nine taxable years (long-term non-domiciliaries or “LTNDs”). Under this rule, a LTND who elects the remittance basis of taxation is required to pay the RBC of £30,000 in addition to the remittance basis tax.
Rev. Rul. 2011-19 concludes that the RBC of £30,000 is an “income tax” for which a credit is allowable under Code §901.