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declaring US health insurance benefits

declaring US health insurance benefits

Old Apr 1st 2018, 4:59 pm
  #1  
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Default declaring US health insurance benefits

I worked in the US for nine months and understand I need to declare my US income in a UK tax return this year.

I am concerned that I may have to pay tax in the UK on my employers’ health insurance contribution (I paid 25%, and my employer paid 75%). This is a huge amount and somewhat unfair given that health insurance premiums are non-taxable in the US and that health cover is hardly a luxury for living in the US (and the fact that premiums are tax free in the US inflates overall prices).

Does anyone have any knowledge or experience of this issue?
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Old Apr 2nd 2018, 3:53 pm
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Default Re: declaring US health insurance benefits

Since you don't pay tax on US employer sponsored healthcare in the US, why would it be taxed in the UK? Wouldn't that mean that the money you paid for your share of the healthcare would be a deduction?

Since no one has answered you, perhaps you need to contact an accountant in the UK for answers.
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Old Apr 2nd 2018, 5:33 pm
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Default Re: declaring US health insurance benefits

Thanks. My reasoning was that the HMRC regards private health insurance contributions by an employer in the UK to be taxable benefits in kind. Given that, I could not see why they would not make the same argument on 'worldwide income', regardless of how it is treated by the US federal tax authorities. But after days of searching the internet, I could find no guidance.

But you're right, I need to approach an accountant. Was hoping not to as I usually do my own returns, but this is getting too complex.
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Old Apr 2nd 2018, 9:21 pm
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Default Re: declaring US health insurance benefits

I assume it has not change but things like Private Health Insurance premiums in the UK are treated as a benefit in kind and taxable.

Mine certainly were.

Not sure if you need to declare your US income to the UK, my first thought would be no but obviously something you need to look into.
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Old Apr 3rd 2018, 12:51 am
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Default Re: declaring US health insurance benefits

How did it work out that you were a UK tax resident?
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Old Apr 3rd 2018, 11:44 am
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Default Re: declaring US health insurance benefits

It is true that I spent more than 183 days in the US during the 2017 tax year (8 months of the tax year), but I assumed that because at all other times I live and work in the UK, then I am tax resident. I have to say though that the HMRC documentation is almost impossible to follow on this.
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Old Apr 3rd 2018, 11:47 am
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Default Re: declaring US health insurance benefits

Originally Posted by leifeng75 View Post
It is true that I spent more than 183 days in the US during the 2017 tax year (8 months of the tax year), but I assumed that because at all other times I live and work in the UK, then I am tax resident. I have to say though that the HMRC documentation is almost impossible to follow on this.
Note that the UK and US tax years run differently (one being calendar year and other being April 6 - April 5).

Not sure what's difficult to compute though (https://www.gov.uk/tax-foreign-income/residence):

Work out your residence status
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).

You’re automatically resident if either:

you spent 183 or more days in the UK in the tax year
your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year
You’re automatically non-resident if either:

you spent fewer than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years)
you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
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Old Apr 3rd 2018, 11:52 am
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Default Re: declaring US health insurance benefits

the tricky thing is that I'm neither automatically resident or automatically non-resident. Then it comes down to whether you have 'ties' to the UK, which by my calculation I do. This involves how many days you've spent in the UK in previous years.
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Old Apr 3rd 2018, 11:57 am
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Default Re: declaring US health insurance benefits

At issue is the fact that you are liable to file US income tax if you spent 183 days in the US in one calendar year. If you did, then won't filing taxes in the US mean that you won't have to declare that income on a UK tax form?
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Old Apr 3rd 2018, 12:05 pm
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Default Re: declaring US health insurance benefits

My employer did withhold tax and I filed a tax return, but it was not a W2 form I received but a 1042-S (Foreign Person's US Source Income Subject to Withholding), i.e. the paperwork explicitly noted me as a non-resident. This means also I'm entitled to a rebate. In any case, as I understand it, being taxed by the US in itself does not mean that you aren't taxed in the UK, though there is a treaty to ensure that you're not taxed twice for the same income. This means you deduct the US tax from your declaration to HMRC. But as the UK tax rate is generally higher, you still have to pay the difference.

So basically, if you're still tax resident in the UK, HMRC want to know your worldwide income, though you can subtract tax paid elsewhere. Of course, simply not declaring to HMRC is an option, but personally I'd rather just pay what I owe and not live with the fear of getting caught out.
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Old Apr 3rd 2018, 1:02 pm
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Default Re: declaring US health insurance benefits

Originally Posted by leifeng75 View Post
My employer did withhold tax and I filed a tax return, but it was not a W2 form I received but a 1042-S (Foreign Person's US Source Income Subject to Withholding), i.e. the paperwork explicitly noted me as a non-resident. This means also I'm entitled to a rebate. In any case, as I understand it, being taxed by the US in itself does not mean that you aren't taxed in the UK, though there is a treaty to ensure that you're not taxed twice for the same income. This means you deduct the US tax from your declaration to HMRC. But as the UK tax rate is generally higher, you still have to pay the difference.

So basically, if you're still tax resident in the UK, HMRC want to know your worldwide income, though you can subtract tax paid elsewhere. Of course, simply not declaring to HMRC is an option, but personally I'd rather just pay what I owe and not live with the fear of getting caught out.
In that case it sounds like you need a CPA experienced in this. Did your employer not provide one as part of this? Or could they recommend one?
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Old Apr 4th 2018, 3:01 pm
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Default Re: declaring US health insurance benefits

Originally Posted by leifeng75 View Post
I worked in the US for nine months and understand I need to declare my US income in a UK tax return this year.

I am concerned that I may have to pay tax in the UK on my employers’ health insurance contribution (I paid 25%, and my employer paid 75%). This is a huge amount and somewhat unfair given that health insurance premiums are non-taxable in the US and that health cover is hardly a luxury for living in the US (and the fact that premiums are tax free in the US inflates overall prices).

Does anyone have any knowledge or experience of this issue?
You can certainly be considered dual resident in both the USA and UK based on the numbers of days you have spent in each country during their tax year and other factors. You say that you worked for 9 months in the USA, does that mean that you are back living in the UK?

The Double Taxation Agreement will determine which country gets to tax first, and tax credits can be claimed to offset the tax in the other country.

Where you are "domiciled" is also a factor and I agree with the advice to contact a tax advisor qualified in both countries. When we first moved to the USA the company provided and paid for a tax accountant.

I don't know HMRC's approach to company provided HI in the USA or other benefits such as company cars etc. It is only recently that US employers have been required to provide the details of the benefit on the annual employee tax form W-2 (box 12DD), not sure about 1042-S. It was thought it may be a precursor to counting the subsidy as a taxable benefit in the USA but with the change of administration that is unlikely to happen anytime soon.

Last edited by durham_lad; Apr 4th 2018 at 3:08 pm.
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