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Dual residency US and UK where US remains primary

Dual residency US and UK where US remains primary

Old Jun 5th 2019, 8:32 pm
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Default Dual residency US and UK where US remains primary

I suspect this is easy to do tax wise but I am getting really expensive quotes for professional advice - most recent quote was £4000 for advice and tax returns so hoping I can get some guidance here.

I am US / UK dual citizen and have lived in US for 40 years. I am retired with an annual income of about $15k in dividends + any stocks I decide to sell that year.
My father died recently and I inherited half of his house in Sussex and some cash. I intend to spend several months in the UK dealing with the estate and fixing the house up - enough time to satisfy the UK SRT triggering residency for 2019-2020. My US home will remain my primary and I have no intention of 'moving' anything to UK so I fall into a dual residency situation that is explained reasonably well in HMRC HS302 instructions.
For this year I wont need to sell any stock so my income will be $15K in dividends from US with no CG's + a few hundred pounds of Interest from UK bank account where the inherited cash is.

Am I right to assume that as far as the US is concerned I will still be a normal resident just like I was last year - ie no change in the way I do my taxes other than to add in any foreign interest income and so I can continue to do my taxes myself as I have always done (for about $20 ) vs spending lots of money hiring an 'expert'? I think I need to file a form 3520 to notify IRS of my inheritance but it does no look hard.

Further for UK taxes, can I just notify HMRC once I satisfy SRT and then do a simple self-assessment myself at the end of the year using my US + UK income again without an 'expert'?
It just does not seem make sense for me to spend £4000 to perhaps save a few hundred through treaty claims etc for such low income.

Am I missing anything that would make the above harder than it appears?

If I do decide to sell my US home later this year after becoming UK resident too and actually move back to UK am I then exposed to UK CG tax on my US home's proceeds or will it still be exempt because it will still be my primary residence when sold?


Thanks

Bill

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Old Jun 6th 2019, 5:40 am
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Default Re: Dual residency US and UK where US remains primary

I would take some professional advice.

With th cgt if you decide to move back to the UK, then there should be none applied on the sale of your primary residence.

While not fully resident in the UK, you may not be eligible for NHS care as the rules now state to be eligible you must be resident in the UK and I don't think this allows for dual residence. This is regardless of citizenship.
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Old Jun 6th 2019, 7:22 am
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Default Re: Dual residency US and UK where US remains primary

Hi
How do you think that you will qualify as resident under the UK SRT?
1. You need to spend more than 183 days in the UK.
2. You have a home in the USA where you spend more than 30 days a year.

I would make sure that you spend sufficient time in the USA and less than 183 days in the UK.
Only the rules covering the period when you have 2 homes apply to you.
UK SRT
Look at examples 4 and 5
I have USC friends who spend the winter in Florida and the summer in France.
They rent a property in France for a complete year but only stay in France for less than 183 days per year to avoid tax residency issues.
I know that they are not in the UK but the same principles apply.
You just spend 5 1/2 months in the UK on holiday.
HTH

Last edited by cyrian; Jun 6th 2019 at 7:25 am.
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Old Jun 6th 2019, 8:17 am
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Default Re: Dual residency US and UK where US remains primary

Since this is a one off I would try and not become UK resident. During similar circumstances we managed to stay 7 months in England in 2011. We were able to arrive in March so the time was over 2 uk tax years plus we took a couple of vacations, to Ireland and to mainland Europe so we were under the 183 days in a single tax year.

We were not covered under the NHS but our US insurance did cover us. We didn’t need to see a doctor as it happens.
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Old Jun 6th 2019, 1:58 pm
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Default Re: Dual residency US and UK where US remains primary

In my reading of the SRT, if I don't meet the automatic tests ( which I won't) then I have to look at the ties test and as I have 2 ties ( accommodation and 90 days) I become resident at 120 days - which I will. But, I will maintain my US primary home and easily satisfy the complicated 'substantial presence' calculation making me a US resident for treaty purposes.
Becoming UK resident does not worry me at all given the paltry amount of extra tax I will pay but I just want to stay within the rules without having to pay through the nose for expert advice for something that appears really simple.

Bill
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Old Jun 24th 2019, 8:39 pm
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Default Re: Dual residency US and UK where US remains primary

Originally Posted by cyrian View Post
Hi
How do you think that you will qualify as resident under the UK SRT?
1. You need to spend more than 183 days in the UK.
2. You have a home in the USA where you spend more than 30 days a year.

I would make sure that you spend sufficient time in the USA and less than 183 days in the UK.
Only the rules covering the period when you have 2 homes apply to you.
UK SRT
Look at examples 4 and 5
I have USC friends who spend the winter in Florida and the summer in France.
They rent a property in France for a complete year but only stay in France for less than 183 days per year to avoid tax residency issues.
I know that they are not in the UK but the same principles apply.
You just spend 5 1/2 months in the UK on holiday.
HTH
Could we pursue this a bit further? I am a retired USC/UKC with primary residence in the US. I would like to take extended (multi-month) visits to the UK as well as doing short breaks and longer trips to the continent, returning to the UK to regroup and catch my breath.

I no longer have any family ties in the UK, nor do I own property there.

Could I rent a property in the UK for an extended period (year?), but carefully stay less than 183 days in the UK per tax year, and thus avoid becoming a UK resident for tax purposes? I suppose my idea might be described as becoming a longish-term tourist.

Can someone please point me to the relevant government documents?

Thank you.

Last edited by GreyDawg; Jun 24th 2019 at 8:43 pm.
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Old Jun 24th 2019, 9:01 pm
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Default Re: Dual residency US and UK where US remains primary

Originally Posted by GreyDawg View Post
Could we pursue this a bit further? I am a retired USC/UKC with primary residence in the US. I would like to take extended (multi-month) visits to the UK as well as doing short breaks and longer trips to the continent, returning to the UK to regroup and catch my breath.

I no longer have any family ties in the UK, nor do I own property there.

Could I rent a property in the UK for an extended period (year?), but carefully stay less than 183 days in the UK per tax year, and thus avoid becoming a UK resident for tax purposes? I suppose my idea might be described as becoming a longish-term tourist.
It is your physical presence in the UK that counts towards the 183 days, not whether you own, or have rented a home in the UK. So yes you could rent a place then come and go, but just be sure not to exceed 183 days in the UK during any one tax year - i.e. April 6th-May 5th
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Old Jun 25th 2019, 9:10 am
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Default Re: Dual residency US and UK where US remains primary

You cannot be resident in two different jurisdictions. One or the other !
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Old Jun 25th 2019, 10:51 am
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Default Re: Dual residency US and UK where US remains primary

Only you can decide if you meet the requirements for being considered ordinarily resident.

From what you have said above it appears you have decided that the conclusion on residency comes down to the sufficient ties test. Of those ties the accommodation tie means a permanent home to live in and that includes a rental house that you have furnished yourself, which distinguishes it from a vacation rental. We went through this 8 years ago when we rented a house for 7 months in England split over 2 tax years, March through October. While in England we did trips to Europe and kept a track of days in the country to be sure that we did not break the 183 days rule or the 90 day average over 4 years, which was a residency rule at the time. Our US private health insurance covered us in the UK and Europe and we had a great time.

However, our UK bank snitched on us as they recorded us making ATM transactions and shortly after returning to the USA we received a letter, apologizing that HMRC required them to do this, saying that it appeared that we have been resident in the UK this year and asked to complete and return an HMRC form detailing our stay that year, the previous 3 years and planned stays over the next 4 years. I'm sure that form has now changed since the residency rules have changed.

Our stay worked out well and we heard no more back from HMRC, so if you do go ahead with your plans be prepared to prove your case to HMRC should they ask, and don't attempt access to public funds such as the NHS without declaring yourself as non-resident. (As a renter you will be paying council tax direct to the council so you will have access to all those local services such as libraries).

It certainly sounds to me that you have enough US ties to not be UK resident so as long as you avoid 183 days in any one tax year that you will be just fine, so keep careful track of your nights in the UK and plan trips to Ireland or somewhere to keep yourself below the limit. You are correct to assume that you will have to file US taxes regardless of where in the world you are a resident, that is part of being a USC, and you should be able to file your taxes yourself like you always do.
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Old Jun 25th 2019, 1:46 pm
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Default Re: Dual residency US and UK where US remains primary

Originally Posted by scot47 View Post
You cannot be resident in two different jurisdictions. One or the other !
Actually you can, especially with the UK having an eccentric tax year, but you should move heaven and earth to avoid ever entering that tax minefield. ….. Plan on staying at least seven months of the year in one country, or dividing your time outside (what you consider to be) your home country for tax purposes into time in two or more other countries e.g. spend five months of the year in the US, then three months of the year in the UK, and four months of the year touring Europe.

And as Durham Lad said, if you are spending months at a time in different countries each year, be sure to keep a detailed diary of your travel and movements, backed up with airline tickets, hotel reservations, car hire receipts, etc in case you are ever challenged to prove where you were or how much time you were in/not in the UK, or US, or any other country for that matter.

Last edited by Pulaski; Jun 25th 2019 at 1:51 pm.
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Old Jun 25th 2019, 3:55 pm
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Default Re: Dual residency US and UK where US remains primary

I am no expert on this yet but I do disagree with recent statements in this thread.

1. you are ok if you stay under 183 days.
If you read the SRT ( linked earlier) you will see that you need to consider the ties tests. Unless you spend your time in UK hotels then you will likely satisfy the 'accommodation' test - renting or owning does not matter.
And, if this is an ongoing strategy then you will likely also satisfy the 90 day test in your second year reducing the time in UK that is safe from residency to 120 days

2. No dual residency.
Not true. I think there may be confusion due to the way that the tax treaties use rules to pick a single 'winning' residency for tax treaty purposes.Just because there is a single winner for treaty does not mean that dual residency is not possible.
See HRMC doc on form HS 302 dual residents self assessment helpsheet.

Note that US is treated as a special case making US treaty residency easier to prove. If you are a USC and have a home in the US then you have US treaty residency if you spend any time there in a year.


So in my case I know I will become UK resident TOO this year and will have to file a UK self-assessment next year with a form 302 claiming US treaty residence.

What I still don't yet know is how much of my US income can be shielded ( full or partial exemption) using the UK 302 since the actual treaty language is pretty hard to read and the 'experts' I have talked to knew all about moving to UK but not dual residency and treaty issues.

Here are my core unanswered questions regarding tax treaty and 302 assuming I am US treaty resident:
Are US dividends fully or partially shielded from UK tax - what treaty number to use on 302?
Same question for US interest
Same question for US capital gains
Same question for US Social Security payments paid to my US bank

Once I figure this stuff out I will know how expensive this will be but actually filling out the UK tax forms should be easy once I know which code numbers to use in the 302

I will update the thread as I find out more.

Bill
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Old Jun 27th 2019, 1:18 pm
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Default Re: Dual residency US and UK where US remains primary

Originally Posted by bilmar19 View Post
I am no expert on this yet but I do disagree with recent statements in this thread.

1. you are ok if you stay under 183 days.
If you read the SRT ( linked earlier) you will see that you need to consider the ties tests. Unless you spend your time in UK hotels then you will likely satisfy the 'accommodation' test - renting or owning does not matter.
And, if this is an ongoing strategy then you will likely also satisfy the 90 day test in your second year reducing the time in UK that is safe from residency to 120 days

2. No dual residency.
Not true. I think there may be confusion due to the way that the tax treaties use rules to pick a single 'winning' residency for tax treaty purposes.Just because there is a single winner for treaty does not mean that dual residency is not possible.
See HRMC doc on form HS 302 dual residents self assessment helpsheet.

Note that US is treated as a special case making US treaty residency easier to prove. If you are a USC and have a home in the US then you have US treaty residency if you spend any time there in a year.


So in my case I know I will become UK resident TOO this year and will have to file a UK self-assessment next year with a form 302 claiming US treaty residence.

What I still don't yet know is how much of my US income can be shielded ( full or partial exemption) using the UK 302 since the actual treaty language is pretty hard to read and the 'experts' I have talked to knew all about moving to UK but not dual residency and treaty issues.

Here are my core unanswered questions regarding tax treaty and 302 assuming I am US treaty resident:
Are US dividends fully or partially shielded from UK tax - what treaty number to use on 302?
Same question for US interest
Same question for US capital gains
Same question for US Social Security payments paid to my US bank

Once I figure this stuff out I will know how expensive this will be but actually filling out the UK tax forms should be easy once I know which code numbers to use in the 302

I will update the thread as I find out more.

Bill
Good post!

just wondering - if you’re a USC have you looked at using the remittance basis method for your UK taxes?

Thats what I did when I was on assignment in the UK.

In (and as a simplified) summary - you lose the personal allowance, but you only pay tax on money brought into the UK.

Apologies if if you knew this already - but I thought I’d mention it just in case.

cheers
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Old Jun 29th 2019, 5:52 pm
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Default Re: Dual residency US and UK where US remains primary

Originally Posted by Tahiti_Bound View Post


Good post!

just wondering - if you’re a USC have you looked at using the remittance basis method for your UK taxes?

Thats what I did when I was on assignment in the UK.

In (and as a simplified) summary - you lose the personal allowance, but you only pay tax on money brought into the UK.

Apologies if if you knew this already - but I thought I’d mention it just in case.

cheers
I did look at that but since I was born in UK to UK father it appears that I would become 'deemed domicile' as soon as I become resident in UK again and thus ineligible for remittance basis.

Bill
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Old Jun 30th 2019, 10:00 am
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Default Re: Dual residency US and UK where US remains primary

I am curious why you think you need to file IRS Form 3520, as I assume this was a simple inheritance, and nothing to do with a foreign trust.
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Old Jun 30th 2019, 2:13 pm
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Default Re: Dual residency US and UK where US remains primary

Originally Posted by Vadio View Post
I am curious why you think you need to file IRS Form 3520, as I assume this was a simple inheritance, and nothing to do with a foreign trust.
I was told this by an 'expert' and the IRS instructions do seem to confirm that I do need to do so for an inheritance over $100K from my UKC dad's estate

in 3520 instructions 'who must file'
4. You are a U.S. person who, during the current tax year, received either:
a. More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests;
or b. ..........

Now you would think that this is duplicating what is in the FBAR I am required to file too but with the scary penalties associated with NOT filing 3520 why take the risk, especially since it will not cost me anything.

Bill
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