Hello HMRC ... anyone there?
 

I'm a dual citizen, British/US. We bought a flat in the UK this January, I came here mid May, and although I'll be going back to the U.S. periodically, I intend to spend more than half my time in the UK. I got on the electoral register, renewed my British driving licence, got my senior bus pass, and signed up at the local NHS practice.

I tried calling the HMRC on the phone but no reply. I wrote to them back in May, but no response. The main reason I wrote was that in the US, I received the annual letter saying I could pay the class 2 NIC for the year just elapsed. However, if I'd returned to live in the UK, I should write to them to inform them of this. (I still want to pay the voluntary NIC for 2014-2015, but now I should pay class 1 maybe?)

So I wrote to them giving my new UK address but no response. Leaving aside the question of the NIC, I'm wondering what I need to do about tax, bearing in mind they don't seem to want to see me from their panopticon.

My income is all foreign, none UK sourced. I have bank interest in IoM, and from the U.S., a couple of 403b derived annuities and US Social Security. Also US bank interest. I assume sometime after the end of the current British tax year I should complete a self assessment?

In the US we file married filing jointly. My wife is still fully US resident and intends to only spend a couple of holidays in the UK each year, less than 90 days total..

As a carefree retiree I want tax to be as simple as possible! :unsure:

Re: Hello HMRC ... anyone there?
 

Have you read this: https://www.gov.uk/national-insuranc...urance-classes

I'm trying to compare your situation with my husband's situation when we moved back. He didn't pay voluntary NI contributions while in the US, and was almost 71 when we returned. Seems to me that you would be paying Class 3, and should have been paying that while US resident, not Class 2. BUT - this is well outside my knowledge base.

Since you returned in May, you will definitely need to file a SA for the 2015-2016 tax year because you have foreign income. You may need to research whether you will be claiming remittance basis, or arising basis; that can be a minefield so I hear, but ours is all remittance basis, so simpler for us.

Remember the US SS is only taxable here in the UK. Did you arrange to have it deposited to a UK account? (Ours is - arrives promptly on the 3rd of each month, at bank Fx rate, no fees, and makes the reporting on the SA so much easier as we know the amount received in GB£ w/o having to look up Fx rates and calculate.)

Re: Hello HMRC ... anyone there?
 

We contacted HMRC when we returned a few months ago in May and they got back to us immediately.

However, they said we did not have to pay any tax this year......no doubt they will catch up with us in the future.

Re: Hello HMRC ... anyone there?
 

Thank you, Vadio and Grayling. Good information.

I looked around on the HMRC website and, in terms of my tax responsibilities, it looks like my deadline to register for self assessment is 5 October 2016. Then I think there's a deadline for actually filing, end of January 2017.

I'm just not sure how this plays out with my US tax return, deadline April 2016, when I'll be entering the taxable amount of my US SS as $0!! I won't have any paperwork from the HMRC by that point, because my self assessment will still be way in the future.

My US SS I'll still be getting deposited in our US current account for the time being. Yes, it'll be more work preparing the self assessment, as I'll presumably have to apply a fx conversion to each monthly amount received. I don't know if the HMRC specify what daily exchange rate to use.

For the NIC, I'll probably just pay it on the invoice they sent me in the US. Then, if they feel I've sent the wrong amount, they can squeal when they receive it. I could be wrong about the class of NIC they invoice me for, it is something they determined when I first started paying a few years ago.

Re: Hello HMRC ... anyone there?
 

I don't really expect a quick reply from HMRC, but I do make sure I inform them of any changes to my circumstances in writing and obviously I keep a copy of any letters.

So I would write to the International Pensions folks up in Long Benton and I would use the online form to tell HMRC about my change of address. I'd probably register for self assessment immediately and then I'd be sure HMRC knows my circumstances. Its a pain that it's increasingly difficult to actually speak to anyone at HMRC.

Re: Hello HMRC ... anyone there?
 

Robin, welcome to the offset tax year problem compounded by the first year filing problem.

The first suggestion is to call the 0300 200 3310 number, wait for the menu selection, then press the number for "I owe HMRC £1 million in tax and I haven't paid." Someone will answer within 60 seconds. I'm guessing you've already tried that. I usually call mid to late afternoon when those poor souls who are still working at the day job are thinking more of going home rather than calling HMRC. Still a wait, but usually no longer than 10 minutes.

End of suggestions!

If I remember your circumstances correctly, when you do have the opportunity to talk to HMRC, you'll be interested in "Payments on Account". These are advanced payments for a tax year made on 31 July and 31 Jan. The 31 Jan payment can be made in Nov. or Dec. of the preceding year, the same year you make the 31 July payment. That's important for your US return. If you use the "cash basis" (normal) for form 1116 (tax paid), you may include both for that US tax year.

As you likely already know, UK tax cannot be deducted from the UK State Pension.

This might be helpful, but for US tax year 2015, you may still come up short on UK tax credits. It happens. There's always one year when things are screwed up, but once you set up the routine of paying UK tax first, then taking the tax credit on what you've paid the UK for the same year, the situation becomes normal and easier.

Some try to be clever with the UK filing by claiming US tax paid, and it may work. Trust me, that can lead to filing purgatory by the second or third year. IMHO, suffer the first year, and eventually things will come right.


https://www.gov.uk/understand-self-a...nts-on-account

Re: Hello HMRC ... anyone there?
 

Good advice from the OAP. Don't mess around, pay UK tax and then claim US tax credits. Once you get into a routine things should become almost automatic as long as your circumstances don't change wildly

Re: Hello HMRC ... anyone there?
 

Just realized a mistake in my earlier post - we use the ARISING basis, not remittance basis. Too late to do an edit, hence another post.

Must have been one of my far too many 'senior moments'. (That's my story and I'm sticking to it...)

Re: Hello HMRC ... anyone there?
 

So if I take no action now, but do a SA with HMRC in (say) November or December 2016, for the 2015-2016 tax year, and I pay some tax due to HMRC, then I could fill out a form (1116, is it?) to accompany my 2016 IRS form 1040, which (DG) I will prepare and submit in February or March 2017?

But am I right in thinking that tax paid in the UK on my US SS can't be claimed back from the IRS, because it wouldn't be taxable in the US?

HMRC don't mind if they get the money in arrears?

Re: Hello HMRC ... anyone there?
 

IMO, you might as well register for SA now; will save time later when they start getting really busy as the end of the tax year approaches.

AFAIK, the UK tax on US SS can't be claimed back (also you only pay UK tax on 90% of the SS benefit - if you do an on-line SA, you need to calculate the amount in GB£ and enter 90% of the total. The program does not make that calculation).

Unlike the IRS, HMRC doesn't demand the full amount when the return is filed. Still a strange concept to me given that the dreaded April 15th deadline loomed large in my mind for most of my life. The differing tax years is where it gets tricky of course. For the Form 1116, you have the option of tax paid or accrued. We have interest income here, so that's easy - it's deducted at source, so we know how much and when. Hubby's UK state pension has no UK tax deducted, but until this year his income was just under the UK personal allowance, so it was never an issue. My income is US SS, so again, not part of the Form 1116 equation. I dread the calculations I'll need to do when I start drawing the RMD's from my IRA accounts. Thankfully, I'm reasonably proficient using Excel, so it won't be too onerous to figure the UK tax as an 'accrued' amount.

Others who have been doing this for more years than I can definitely provide more information; our returns have been simple up to now, even for the year we moved back.

EDIT - just wanted to add that theOAP has provided some very sound info, as per usual!

Re: Hello HMRC ... anyone there?
 

I used to think I was proficient using excel until a colleague tried to explain the concept of pivot tables to me which is when the seed was planted in my mind, time to think of retiring.

Re: Hello HMRC ... anyone there?
 

As there is zero US tax to pay on US SS when paid to a UK tax resident you cannot claim a US tax credit for any UK tax you have to pay on it.

Re: Hello HMRC ... anyone there?
 

My thinking, for what it's worth (which is 0). I'm sure you've probably already worked this out.


Assumptions:
US citizen.
UK permanent residence established May, 2015.
UK tax on arising basis, not remittance basis.
UK State pension payable in 2015.
US SSA pension payable in 2015.
Income from accounts, IoM.
All other pensions are US sourced.
UK taxable income will exceed tax free threshold.


US 2014, file and pay in 2015 - Pay US tax as normal.
UK 2014/15, file in 2015/16, pay tax by 1 Jan 2016 - You will have no UK tax due for this period and no need to file


US 2015, file and pay in 2016 - Pay US tax as normal, except US SSA payments. Potential problem: the US loves to apportion amounts. Will the SSA payments need to be apportioned (Jan to May, and June to Dec) for calculation on tax free (UK resident) amount? You will have NO UK tax credits for 1116 for 2015 since you owe no UK tax for 2014/15. NOTE: I have no idea how your other US pensions may have special treatment for US tax as a UK resident.
UK 2015/16, file in 2016/17, pay in 2016/17 - Complete self assessment. There will be tax due (May 2015 to Apr 2016), but it's not due till 31 Jan. 2017. IMHO, HMRC will not be able to withhold tax from any UK source per a tax code, so pay tax due by payment on account in two separate payments, one 31 July 2016 and one in Dec. 2016.


YES, that means you've paid both the US and the UK tax in 2016. It was your bright idea to leave Murika, how could you? According to all other resident Murikans, it serves you right for leaving.


US 2016, file and pay in 2017 - Use payments by payment on account to HMRC (31 July 2016 and Dec. 2016) as foreign tax paid on form 1116. This reduces US tax due.


UK 2016/17, file in 2017/18, pay in 2017/18 - repeat 2015/16,...


US 2017, file and pay in 2018 - repeat 2016,....

Re: Hello HMRC ... anyone there?
 

Yes, that's what I thought. Thanks for the confirmation.

Re: Hello HMRC ... anyone there?
 

Thank you very much for this. It makes me think I'm more or less on the right track here. Your assumptions are all about right, except that in fact I started to receive US SS in May 2015, which coincidentally was when I returned to UK so that makes it a bit easier. Also, I'm deferring the British state pension for at least a year or two, so not getting that yet.

I'm seeing a problem with continuing to file married filing jointly. My wife still lives in the US, I was assuming we would continue to file giving our US address. When I send in the 1040 with $0 as the taxable amount on line 16, SS, there would be no clue in our address at the top of the 1040 about this new foreign residency I'm asserting..? Especially as 2015 filing (to be submitted March 2016) there won't be any foreign tax credits claimed at that point.

On another topic, I held on for 25 minutes and got someone on the 03002003506 number. He recorded my new address, and said I could go ahead and pay the voluntary NIC for the period 6/4/14-11/4/15 as invoiced, 145.74 pounds. He told me despite moving to UK, there was no change, I was still eligible for class 2.

Then I asked about self assessment, he transferred me to another dept. The person who answered the phone sounded totally nonplussed when I said I had returned to live in the UK and wanted to register as such, for self assessment etc. He said, you're retired? Retired people don't need to pay tax. There's no tax on the state pension. He said, do you have rental income or capital gains? I said, no. Then I mentioned US SS and US based pensions and annuities. He said, oh no, we don't tax those here, you'll pay any tax over there....

Hmm.. there does seem to be a different attitude to tax in the UK. It seems that the default in 90% of cases is that income is either taxed at source or there's no tax due anyway, presumably because you're under the tax free allowance. Well, in fact, my income will be fairly low in 2015-16, but still it will be more than the UK tax free allowance, because I have US SS of $1200 a month, and a couple of pensions and annuities in addition.

Which leads me to another thought. US SS is taxable in UK. Simple example, I formerly received $1200 per month. But from August 2015 I'll be getting about $1095, because Medicare part B premiums will now be deducted at source. Will I still have to pay UK tax on the whole amount?

Oh well, at least I can have a proper cup of tea when my head hurts in England...

Re: Hello HMRC ... anyone there?
 

Agreed, that makes it much easier.

When I did my rough calculations of your situation, I couldn't help but think your filing jointly with a wife in the US would be to your advantage, and would likely result in an even lower tax amount to start with (before any available foreign deductions). You could wing it, put $0, and if it comes back, explain the situation. Or, although it isn't strictly required, you could file form 8833 (Treaty position) and note your foreign address there and very briefly indicate the two residences.


I suggest you send this person birthday cards, Hanukkah or Chanukah/Diwali/Christmas/New Years/Seasons Greetings cards, and boxes of chocolate/Fosters, PROVIDED they guarantee to hold HMRC to this statement forever and ever.


I suppose if he meant you could pay the tax in the US and claim a tax credit on the UK return, then he's close.


It's sad to see HMRC deteriorate to the current state of lack of expertise and helpfulness. 30 years ago, they were the top agency in the world and advice on the phone was most reliable. One wonders why they include all the areas to declare foreign pensions on the form if what he says is true.


I have a yearly conversation with them to correct their initial tax coding. It's always wrong (I even had a letter of apology from the Dept. head) and it's down to my (untaxed foreign per a treaty) pensions.

I've never given this any thought since I don't have part B. An off the cuff comment, which may or may not be worth listening to: HMRC tends to weigh foreign pensions by the amount that is remitted to the UK,....only.

Re: Hello HMRC ... anyone there?
 

I actually don't remit ANY of my US SS to the UK, at present. We keep it in the U.S. to help fund our various bills over there.

Re: Hello HMRC ... anyone there?
 

Does this mean you are going to choose to be taxed on a remittance basis?

This is all very confusing to me, but if you are going to be taxed on an arising basis then I believe (perhaps wrongly) that a UK resident is taxed on US SS regardless of whether or not it is left in the USA.

Re: Hello HMRC ... anyone there?
 

Tough one, and not enjoyable.


I should clarify the above from my previous post. My non-UK pensions (from an EU country) have very small (read insignificant) amounts deducted for public health assistance. It comes off everyone's pension in that country. I tend to declare only the remaining 99.9% (-10%) pension payments that are made in the UK in £'s, and which are tax free in the other country per a treaty.


Robin's situation is entirely different. Being resident in the UK and taxed on the arising basis, as I believe he intends, means US SSA is taxed in the UK per the treaty. How to explain the situation of payments being made in the US to the IRS is a good question especially since he is filing MFJ with a US resident spouse.


Robin, what are your long term intentions? Perhaps, since little/nothing (?) is remitted to the UK, might it be worth while exploring being taxed on the remittance basis for a few years? I haven't a clue how you would explain your current residence in the UK as temporary which would mean a permanent home in the US which you intend to return to.

Re: Hello HMRC ... anyone there?
 

Well that's a surprise given that Class 2 NICs back in the UK are for the self employed. If you are below UK retirement age you might be able to pay top up Class 3 voluntary NICs or if you work you will probably pay Class 1. I believe that you got poor advice apart form being told to go ahead and pay the invoice for the Class 2. I would contact the International Pensions office in Long Benton and tell them about your return to the UK and they will probably give you more accurate information.

This is almost 100% incorrect. Please do not take advice on international tax matters from HMRC agents over the phone. Your UK tax status and the type of income/pension will decide whether it is UK taxable and of course a thorough comprehension of the US/UK tax treaty is also required. Your HMRC person obviously has no idea that your US SS and private US retirement accounts and annuities will definitely be UK taxable (assuming you are taxed on an arising basis).

This is a great question. I don't think you can get tax relief in the UK for health insurance premiums you pay yourself so I don't think you'd get tax relief on Medicare payments.....so my first take would be that you pay UK tax on the entire US SS amount.

Re: Hello HMRC ... anyone there?
 

I have phoned HMRC twice and had prompt answers on this number 44 161 931 9070. It is supposed to be used by callers who are overseas, however I used my US based Skype account while sitting here in England and got through OK.

Re: Hello HMRC ... anyone there?
 

I had always assumed opting for the arising basis. And I think you're correct, makes no difference to tax liability, whether income remains in US or I bring it over here. My assumption has always been it is my residence that determines the tax liability.

Now, I know that HMRC has a way of defining whether or not one is resident in the UK. From memory, it's something to do with thresholds of presence in the UK (90 days, 180 days, something like that.) Also certain other qualifying factors are counted in, such as whether you own property in the UK... It is complicated but capable of being used to make a judgement as to whether or not you're a resident. I plan to be a resident, starting May 2015.

By contrast, I don't think the IRS judges whether a U.S. citizen is resident in the US or not. It is up to the non resident citizen to claim foreign tax credits, and assert that they paid tax to HMRC on the U.S. SS (for instance.)

I haven't explored the remittance basis, as I believe there's some high initial fixed cost that it involves, making it unattractive for a person with low to average income?

I feel I shouldn't publicly declare my intentions on BE, until I've declared them to my wife ;) Seriously, we haven't 100% decided where to make our primary home. We need to downsize in the US, so that we have "lock up and leave" capability in both countries, and I assume sometime over the next couple of years we will have figured it out. Me paying a Medicare premium is a sign of hedging bets for the time being.

What's the thing about only ninety percent of US SS being taxable in UK?

Re: Hello HMRC ... anyone there?
 

Thanks. Holding on for 25 minutes was frustrating. The music they played in a short loop was weird.

Re: Hello HMRC ... anyone there?
 

Agreed, maybe almost 110% incorrect.


In spite of my previous ramblings, I agree with this given the monetary amount of Part B we're talking about.


I'm not sure there's an initial cost. It's really NonDom status, so it's £30,000/year after 7 years. I do think you'll struggle to have this status accepted given your circumstances (retired), but it might work if it results in the best scenario for you. If you were a Brit, head of HSBC, Hong Kong was your main home to which you would return, and you're in the UK to fulfil the position for a limited period, it would definitely work (at least it does for the current head of HSBC).


For US SSA, on the SA form (on the additional foreign income pages) under foreign pensions, you first list the gross amount (in £'s), then in the last column you list the taxable amount which is 90% of the gross amount. (See the instructions for the additional foreign income pages.)

Re: Hello HMRC ... anyone there?
 

As a dual US/UK citizen I don't think you'll see a vast difference in your tax bill between the UK remittance or arising basis. There might be some advantages with capital gains rates or allowances, but any money you leave in the US will be taxed by the IRS and money you bring to the UK will get taxed there. So whether you choose the arising or the remittance basis all you money will be taxed by someone.

Re: Hello HMRC ... anyone there?
 

For this thread, the quick thought was less to do with the actual tax due, and more to do with easing reporting in either country.

In the end, it will probably be a case of Robin filing in the UK on the arising basis and finding a way to do the reporting. HMRC are usually quite relaxed, although I'm sure there are horror stories. As long as an attempt is being made to pay HMRC the tax due, they're quite laid back as compared to the never ceasing threatening IRS letters and IRS own calculations of tax due, pay now.

When thinking of these scenarios, there are always the "complications". If someone files as a NonDom, remittance in the UK, what happens to taxation if the individual receives US SS deposited in the States? Supposedly, remittance basis means only funds sent to the UK are taxed, so if the US SS is deposited in the States, which applies: the UK remittance rules or the Treaty/Totalisation Agreement which says the gross amount is taxed in the UK? I'm not even going to bother thinking more about that!

Re: Hello HMRC ... anyone there?
 

Inquiries about NICs are best dealt with by writing to Longbenton. This is particularly true where your inquiry has international complications.

Re: Hello HMRC ... anyone there?
 

I like this...no US tax due on US SS when paid to a UK resident.....no UK tax due on funds not remitted to the UK....if someone is in that situation and has expenses in the US it might be a little loophole.

Re: Hello HMRC ... anyone there?
 

I am trying to understand this thread since I just moved back to the UK. I will have both US and UK earnings (salary) for 2015 and I am also collecting a U.S. company pension. I do have an accountant in the U.S. who will handle my US returns. He has dealt with overseas US residents before but never one from the UK who is also a U.S. citizen so I think there will be a slight learning curve there. I don't yet have an accountant in the UK.

From what I am reading it seems I will be paying taxes only in the UK which will be offset by tax credits in the U.S. Is this correct?

I hope to retire in the next two to three years. I believe I have to work until 66 - I think that is the age at which I become eligible for full US SS. At that point, if I pay taxes in the UK, which are offset by tax credits in the U.S., won't I end up paying more tax on my SS than if I had been resident in the U.S.?

I understand UK tax returns are due in April every year just like the US but is there anything I have to do this December?

Re: Hello HMRC ... anyone there?
 

If you intend to retire and live permanently in the UK, HMRC will tax your worldwide income on an arising basis. As a US citizen the US wants to do the same. You, and your accountants, need to pay the correct amount of tax to each country.

The problem with using a US accountant is that they have a US-centric approach and must comply with domestic regulations and often neglect to understand that as a UK resident your primary taxation authority is now HMRC.
A gross generalization is that you pay the UK first...even tax on US income and gains (dividends are a special case)....and then you take a credit on your US taxes for the taxes you have paid to the UK.

As for your US SS that is not taxable in the US and you will pay tax on it in the UK at your marginal income tax rate. You lose the possibility of having some of it be tax free that you'd get if you lived in the US. As for the US company pension that is fully taxable in the UK and you will have to resource that by treaty so you can take a foreign tax credit on your US tax return. If there is any withholding tax you'll also enter that you your US taxes. The result might well be a refund check.

Re: Hello HMRC ... anyone there?
 

Don't forget that part of the US SS is essentially 'tax tree' in the UK as they only tax 90% of the benefit.

Re: Hello HMRC ... anyone there?
 

Yes good point!

Re: Hello HMRC ... anyone there?
 

Correct Vadio, we keep saying this but I imagine those unfamiliar with HMRC rules wonder how come we're so sure of this statement.

For those questioning whether the 10% reduction really exists: go to the following GOV.UK page and download the Foreign Notes (2015). In the PDF which opens, go to page FN 7. You will find the following:

Overseas pensions, social security benefits and royalties, etc.

Fill in columns A to F if you received a pension or social security benefits from overseas during 2014–15. (Bold Mine)

and

10% deduction

You can take 10% off the value of overseas pensions, annuities and social security pensions so that only 90% of the amount you receive is taxable in the UK. (Bold Mine)

https://www.gov.uk/government/public...-foreign-sa106

https://www.gov.uk/government/upload...notes-2015.pdf

If filing on paper, Column B is the gross amount and Column F is the 90% taxable amount. I believe Vadio indicated on the on-line filing, only the 90% taxable is included. Vadio to confirm.




And from HMRC directly:


Section 575 (as amended by IT(TOI)A 2005) provides that the taxable amount of a foreign pension is 90% of the actual amount arising in the tax year unless the income is charged in accordance with Section 832 of IT(TOI)A (relevant foreign income charged on the remittance basis).


http://www.hmrc.gov.uk/manuals/eimanual/eim74500.htm

Re: Hello HMRC ... anyone there?
 

I've done my UK SA on-line for the past 2 years. Each time I initially put in 100% of my SS benefit, to test whether the taxable amount was adjusted to reflect the 10% reduction. The UK tax due was calculated based on the exact amount I put on the form. Went back, reduced the SS amount to 90%, and Eureka...the tax agreed with the calculations on my Excel spreadsheet.

Same with hubby's UK SA; did it both ways, and concluded that I needed to put in the (lower) taxable amount, not the total actually received.

Interesting question re: total benefit or benefit less Medicare B premiums. Neither of us signed up for Medicare B, so I never gave that much thought. One thing is for sure....if you call HMRC, they (likely) won't have a clue.

Re: Hello HMRC ... anyone there?
 

A higher percentage (50% or 85%) of your SS will be tax free if you stay in the US...but the UK has some very generous personal and capital gains tax allowances as well. If you are canny with the sources of your income it is possible to come up with a very low tax bill.

Re: Hello HMRC ... anyone there?
 

I really really need to educate myself on pensions/ss etc before I move back.. didn't know UK even taxed social security. anyway.

Re: Hello HMRC ... anyone there?
 

Me, too.

It's the tax issues that I need to understand. I have a U.S. accountant but I understand what Nun is saying in her comments to my inquiry above and am now wondering if I will also need a UK accountant who deals with dual citizens. I really hate to think what they will charge, though. It's been about 30 years or more since I prepared my own tax returns in the U.S. and combined with UK returns, I think I might lose my mind. :ohmy:

Re: Hello HMRC ... anyone there?
 

Yes the whole taxes issue makes you feel like you're losing your mind, but I can't thank the members who share information enough for helping to ease my mind and steer me in the right direction.

Re: Hello HMRC ... anyone there?
 

+1000

We move back next year and I find these threads invaluable.

Re: Hello HMRC ... anyone there?
 

I always avoided accountants in the US because I found them very dim bulbs, and also terrible procrastinators. I had to help out my mother in law a couple of times, when she'd given an accountant all her materials very early, but he'd sat on them till it was too late to correct all his ridiculous errors and omissions before the filing deadline. And this was just standard US income & residence.

I feel UK practice will be a learning curve for me, and one phone call to HMRC will be enough to last me a very long time.

Agreed, many thanks to those who've posted in this thread and other threads, with good insights and information.