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Hello HMRC ... anyone there?

Hello HMRC ... anyone there?

Old Aug 10th 2015, 7:56 am
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Default 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!
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Old Aug 10th 2015, 8:33 am
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Default 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.)
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Old Aug 10th 2015, 9:59 am
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Default 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.
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Old Aug 10th 2015, 11:27 am
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Default 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.
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Old Aug 10th 2015, 12:16 pm
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Default 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.
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Old Aug 10th 2015, 7:14 pm
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Default 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
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Old Aug 10th 2015, 9:23 pm
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Default 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
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Old Aug 11th 2015, 6:52 am
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Default 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...)
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Old Aug 11th 2015, 7:37 am
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Default 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?
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Old Aug 11th 2015, 8:16 am
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Default Re: Hello HMRC ... anyone there?

Originally Posted by robin1234 View Post
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?
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!

Last edited by Vadio; Aug 11th 2015 at 8:18 am.
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Old Aug 11th 2015, 8:29 am
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Default 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.
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Old Aug 11th 2015, 1:17 pm
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Default 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.
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Old Aug 11th 2015, 2:41 pm
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Default 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,....
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Old Aug 12th 2015, 2:22 pm
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Default Re: Hello HMRC ... anyone there?

Originally Posted by nun View Post
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.
Yes, that's what I thought. Thanks for the confirmation.
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Old Aug 12th 2015, 2:59 pm
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Default Re: Hello HMRC ... anyone there?

Originally Posted by theOAP View Post
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,....
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...
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