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Old Jun 26th 2017, 6:43 pm   #1
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Default Bilateral UK/USA tax agreement

Hi everyone,

I'm a Brit who has been in the USA for many years and am finally moving back to the UK. Since I have not worked and paid taxes or NI in the UK since the late 90s I'm wondering what my situation might be. Will they just except that I've been away and welcome me back with open arms .. or will they want proof of me being away and having paid taxes in the USA?

I know there is a bilateral tax agreement which is why I'm asking..

Also currently wondering if shipping back a load of personal belongings using a TOR customs form (for duty/VAT relief) will raise alarm bells.

I guess I would rather not declare I've been in the US all this time.. in case that messes up my USA tax situation (complicated!).

Thanks everyone,

Rick
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Old Jun 26th 2017, 7:02 pm   #2
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Default Re: Bilateral UK/USA tax agreement

IMO you have no reason to be concerned because so long as you have been living and working outside the UK, you aren't liable for UK taxes, or even filing UK returns, so HMR&C really don't care. There is no need or expectation for you to declare where you have been while outside the UK.

Like wise, regarding your household chattels - they're exempt from VAT and import duty (so long as you have owned them for six months - or so long as HMR&C can't prove you haven't! ) so bringing back loads of stuff from your years overseas isn't a big deal either.
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Old Jun 26th 2017, 7:12 pm   #3
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Default Re: Bilateral UK/USA tax agreement

Thanks! That makes sense... I just wondered if the UK/US shared info about expat workers in case of tax dodging.

So from what you're saying, it's in my interest to make sure the UK knows I have not been in the country all this time? I just was concerned that they might want me to prove it - but I guess my passport departure / entry logs does that.

Don't you lose certain benefits by being away for a certain time as an expat? I kept my UK NHS eligibility valid by going back once or twice and year (and always needing to visit doc anyay!) and being registered to vote at my parents etc.

Thanks again.
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Old Jun 26th 2017, 7:18 pm   #4
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Default Re: Bilateral UK/USA tax agreement

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Originally Posted by Sriyantra View Post
Thanks! That makes sense... I just wondered if the UK/US shared info about expat workers in case of tax dodging.

So from what you're saying, it's in my interest to make sure the UK knows I have not been in the country all this time? I just was concerned that they might want me to prove it - but I guess my passport departure / entry logs does that.

Don't you lose certain benefits by being away for a certain time as an expat? I kept my UK NHS eligibility valid by going back once or twice and year (and always needing to visit doc anyway!) and being registered to vote at my parents etc. ....
Er, that isn't how the NHS works, it is based on residence in the UK, so what you have been doing is arguably unlawful.

You can register to vote while outside the UK too (I know, I am myself so registered), and pretending to be in the UK for voting purposes is at best a dubious idea, and may be electoral fraud.

So, it is possible, given those factors, that you might at some point be challenged to prove that you were working outside the UK when you have been, in fact, doing some things that are reserved for residents of the UK.

That said, your passport entry and exit records should be sufficient to prove that you were mostly outside the UK.
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Old Jun 27th 2017, 7:29 am   #5
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Default Re: Bilateral UK/USA tax agreement

Pulaski is right in what he says including the fact that your free doctor visits were illegal while you were away.

Once you are back your residency and right to use the NHS for free commence on the day you arrive. From that day onwards you are taxed on your worldwide income, so if you have any "income" from the USA after you arrive such as pay, interest on savings etc then that is taxable. You can transfer as much money to the UK as you wish with no income tax due.

Next year you will need to file a US tax return for your worldwide income during the time you were in the USA in 2017.
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Old Jun 29th 2017, 3:52 am   #6
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Default Re: Bilateral UK/USA tax agreement

I think as a UK resident, you wouldn't pay UK and US tax on the same US income (savings, investments, pensions, etc.) due to tax treaty preventing double taxation. US income would then be UK taxable only.

But I believe if OP had become a US citizen, worldwide income would still need to be reported to the IRS regardless of residence in UK.

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Old Jun 29th 2017, 11:53 pm   #7
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Default Re: Bilateral UK/USA tax agreement

So, when I move back in a couple of months, my income will be US social security (not benefits) Will I file a tax return in US and UK every year? And how will I know which one is taxing me?

Thanks
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Old Jun 30th 2017, 1:07 am   #8
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Default Re: Bilateral UK/USA tax agreement

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So, when I move back in a couple of months, my income will be US social security (not benefits) Will I file a tax return in US and UK every year? And how will I know which one is taxing me?

Thanks
As I'm about to do the same thing, the laws on this are a little complicated. We should start a wiki thread on this as mrken30 suggested. I'm sure this has been discussed here before as well.

Much depends if you're also a US citizen, where in that case all worldwide income must be reported to the IRS regardless of country of residence. This means a return should be filed every year.

My understanding as far as receiving US social security income as a resident of UK (dual citizen or not), under the UK/US tax treaty SS payments are taxable only in the country of residence, i.e., UK. No US tax owed. But if you were a resident of the US for part of the year before returning to the UK (see IRS residency test), US tax on that income would apply.

In addition, there is no US tax on SS up to certain income levels. The IRS has tax tables showing those SS level thresholds.

I would say any UK citizen planning to receive SS income as a resident of UK would best visit a SS office in the US to confirm his/her situation and tax obligations before returning.

Others may want to chime in or correct me.

Last edited by Richard8655; Jun 30th 2017 at 1:16 am.
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Old Jun 30th 2017, 3:08 pm   #9
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Default Re: Bilateral UK/USA tax agreement

Quote:
Originally Posted by Richard8655 View Post
As I'm about to do the same thing, the laws on this are a little complicated. We should start a wiki thread on this as mrken30 suggested. I'm sure this has been discussed here before as well.

Much depends if you're also a US citizen, where in that case all worldwide income must be reported to the IRS regardless of country of residence. This means a return should be filed every year.

My understanding as far as receiving US social security income as a resident of UK (dual citizen or not), under the UK/US tax treaty SS payments are taxable only in the country of residence, i.e., UK. No US tax owed. But if you were a resident of the US for part of the year before returning to the UK (see IRS residency test), US tax on that income would apply.

In addition, there is no US tax on SS up to certain income levels. The IRS has tax tables showing those SS level thresholds.

I would say any UK citizen planning to receive SS income as a resident of UK would best visit a SS office in the US to confirm his/her situation and tax obligations before returning.

Others may want to chime in or correct me.


Thanks
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Old Aug 20th 2017, 5:58 pm   #10
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Default Re: Bilateral UK/USA tax agreement

Quote:
Originally Posted by Sriyantra View Post
Thanks! That makes sense... I just wondered if the UK/US shared info about expat workers in case of tax dodging.

So from what you're saying, it's in my interest to make sure the UK knows I have not been in the country all this time? I just was concerned that they might want me to prove it - but I guess my passport departure / entry logs does that.

Don't you lose certain benefits by being away for a certain time as an expat? I kept my UK NHS eligibility valid by going back once or twice and year (and always needing to visit doc anyay!) and being registered to vote at my parents etc.

Thanks again.
No, you're always entitled to basic benefits. I've been in the same situation and to be honest, I don't think the government cares. If you wanted to claim unemployment benefits then you might only get the very basic amount. But in terms of NHS, schooling etc, you're a British citizen, so no need to worry.
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Old Aug 20th 2017, 6:58 pm   #11
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Default Re: Bilateral UK/USA tax agreement

Quote:
Originally Posted by Richard8655 View Post
As I'm about to do the same thing, the laws on this are a little complicated. We should start a wiki thread on this as mrken30 suggested. I'm sure this has been discussed here before as well.

Much depends if you're also a US citizen, where in that case all worldwide income must be reported to the IRS regardless of country of residence. This means a return should be filed every year.

My understanding as far as receiving US social security income as a resident of UK (dual citizen or not), under the UK/US tax treaty SS payments are taxable only in the country of residence, i.e., UK. No US tax owed. But if you were a resident of the US for part of the year before returning to the UK (see IRS residency test), US tax on that income would apply.

In addition, there is no US tax on SS up to certain income levels. The IRS has tax tables showing those SS level thresholds.

I would say any UK citizen planning to receive SS income as a resident of UK would best visit a SS office in the US to confirm his/her situation and tax obligations before returning.

Others may want to chime in or correct me.
Good post.

I believe that the treaty says that US SS is only taxed in the country of residence so a UK resident, even a US citizen living in the UK, will have SS taxed in the UK but not all in the US regardless of income.
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Old Sep 27th 2017, 12:15 am   #12
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Default Re: Bilateral UK/USA tax agreement

Richard8655:I would say any UK citizen planning to receive SS income as a resident of UK would best visit a SS office in the US to confirm his/her situation and tax obligations before returning.

Well I tried that at the Rockville Social Security Office. They have no clue about tax obligations once you are outside the US. Indeed, the Social Security Administration will not give tax advice, because they are not the IRS. I don't think you can easily find an IRS employee who is savvy on international tax obligations. Basically you have to ask a specialist international tax accountant. They are likely to be not cheap, so my route is to muddle through what is required by myself. Which means reading the UK-US tax treaty and understanding how it applies to your particular income sources.

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Old Sep 27th 2017, 1:25 am   #13
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Default Re: Bilateral UK/USA tax agreement

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Richard8655:I would say any UK citizen planning to receive SS income as a resident of UK would best visit a SS office in the US to confirm his/her situation and tax obligations before returning.

Well I tried that at the Rockville Social Security Office. They have no clue about tax obligations once you are outside the US. Indeed, the Social Security Administration will not give tax advice, because they are not the IRS. I don't think you can easily find an IRS employee who is savvy on international tax obligations. Basically you have to ask a specialist international tax accountant. They are likely to be not cheap, so my route is to muddle through what is required by myself. Which means reading the UK-US tax treaty and understanding how it applies to your particular income sources.
Good information, thanks. As I should have suspected, social security bureaucrats are not so savvy about their international polices and agreements for expats. I probably then would google social security policies at their web site to find more accurate information. But good to hear from you on what you found out.
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Old Sep 27th 2017, 9:10 am   #14
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Default Re: Bilateral UK/USA tax agreement

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Which means reading the UK-US tax treaty and understanding how it applies to your particular income sources.
IMHO (I am resident in the UK, retired, and have been dual USC/UKC in receipt of both US SS and UK SP.)

Non-USC (US Person), resident in the UK:
1) UK State Pension (gross) is taxable in the UK only.
2) US SS benefit (gross) is taxable in the UK only.

USC (US Person), resident in the UK.
3) The gross amount of the US SS benefit is taxable in the UK on an HMRC self assessment return (Foreign Income pages). For the US 1040 return, use line 20a for declaring the gross benefit amount (per the SSA-1099); line 20b (taxable amount) is $0, per the treaty.
4) The gross amount of the UK State pension is taxable in the UK. As for the US 1040 return, opinions will vary on US taxation according to interpretations of the cross border payment as defined in the treaty. The treaty is badly, if not very badly, worded. Taken literally, the gross amount of the UK State Pension is taxable by the US. For US reporting, some take it literally and some take the 'spirit' of the treaty.

A consideration for 4): If one is retired, it's likely any income (including the UK State Pension) will not be eligible for FEIE. UK tax rates are higher than US tax rates. Since the individual has to use FTCs (tax credits), declare the UK State Pension as gross income on 1040 (included on 16a and b, or 21), and then take the foreign tax credits for UK tax paid on Form 1116. That will likely give excess FTCs.
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Old Sep 27th 2017, 12:30 pm   #15
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Default Re: Bilateral UK/USA tax agreement

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Good information, thanks. As I should have suspected, social security bureaucrats are not so savvy about their international polices and agreements for expats. .....
Why would you expect them to be? There are over 200 countries in the world, do you expect that US domestic SSA staff should be experts on the interconnected tax issues between the US and all 200+ countries?
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