Owen778

These are two separate issues. You could still count as a US resident for tax purposes even if you don't have US (immigration) permanent residency any more.

For this to happen, you would need to pass the US substantial presence test. The basic test is a bit complicated, in terms of numbers, but the closer connection exception basically means that as long as you spend more days each year in the UK than in the US, you aren't a US tax resident.

Owen778

Eh?

The original question, in the first post, was about the "25% lump sum" that is free of tax in the UK. The "oversimplification" I made was to miss off "25%" from the post that seems to have made you want to attack me personally.

Samxboy

Thanks for that...happy days!

vulcan

Owen778

No problem.

MMcD

Nun, of course I know that's been the case up until 2015...but have you looked at the new UK tax rules which just took effect this year?

I ask because as you know, this question surfaced recently in at least 2 different threads. That led me to spend a ton of time on UK govt. web sites - and as far as I was able to fathom (as I say in my post, above) per the changed UK rules - a lump sum need not be taken in 1 payment. But any and all distributions after the initial one will (per the new rules) will be 75% taxable.

To put it another way - in the UK (per the changed rules which took effect in 2015) - receiving a 25% lump sum 100% tax-free requires it's entire distribution in 1 single payment.

I think I have previously posted what I referenced, which I believed confirmed my reasoning....or if I didn't do so - it may have been because it was a pdf doc to which I couldn't link directly....but if you'd like I can try to find it.....

***see what I've just said above

lansbury

A letter from the IRS which backs up all the professional advice I have ever received on the subject. Until the IRS say that they do not expect tax to be paid on the 25% lump sum which is tax free in the UK anything thing else is tilting at windmills.

Nun's theory is just that a theory, maybe a good one, but as yet I have not seen any evidence that somebody has convinced the IRS to except it. Until they do people should work on the supposition that trying to get the 25% lump sum tax free in the US is a gamble.

MMcD

*** Please someone, help me to understand why it might be if what I've just posted above is correct.
And if I'm mistaken....please tell me why.....

lansbury

I said maybe a good one because no-one knows, in the same way you say if you are correct. Until someone is brave enough to take on the IRS and get a definitive decision all this is just theory. I was being polite about nun's theory as I have no idea.

The only thing that isn't theory is the letter from the IRS saying the 25% lump sum is subject to the saver clause and is taxable.

nun

If you are a US tax resident and you receive a lump sum distribution from a UK private pension the IRS will tax 100% of the payment at US income tax rates, unless you have built up a US tax free basis. The UK will tax 75% of the payment at UK income tax rates and you will take a credit for the US tax paid on your UK self assessment against the UK tax due.

MMcD

But 'nun's theory' rests on an assumption with regard not to the IRS - but to the UK.

And it's this assumption I'm asking him about in my post.

I question whether he's taken the totality of the relevant changed rules in UK into account when offering what, on it's face, appears an interesting suggestion.

nun

Yes my idea of taking the 25% UK tax free amount over a number of years so that it becomes more like a periodic payment than a single lump sum is purely a idea. It sounds sensible to me, but I have no idea whether the IRS would agree.

nun

I'm just using the change that the 25% tax free amount can be taken over a number of years rather than as a single payment. So if you have $100k you could now take that as $20k per year over 5 years and under UK rules you'd only be liable to tax on $15k a year.

Of course the key is whether taking the money over 5 years stops it from being a lump sum payment. If it does then there would be no UK tax at all and only 75% of it would be taxable in the US.

Of course we still don't really know what is meant by the term "lump sum" in the treaty. If it is the IRS definition then by spreading the payments out over two years it would not be a lump sum.

Samxboy

All responses very much appreciated. Bit of a no brainer really in that the GC is going back and life will return to 'normal' in dear old blighty! Can't rely on these colonials for sensible fiscal policies.
Needless to say my original question was whether it was possible to get a B2 after a green card. Appreciate that largely depends on my particular circumstances but wondering if anyone had ever done it?

MMcD

Got a bit dicey for a bit tho, didn't it. ->
Wheeesh....

Glad that, in the end, it helped you make a decision
Hope you get some replys re the green card / B2 question....without attendant fisticuffs