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Simple tax question?

Simple tax question?

Old Aug 2nd 2011, 10:59 am
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Default Simple tax question?

I am a GC holder, UK citizen, and my status has just changed from a US resident to dual resident for tax purposes.
I am falling at the first hurdle when trying to complete my UK tax return for my US employment earnings.
When claiming foreign tax credit on taxes paid in the US can I claim both federal and state taxes or just federal?
I called HMRC and asked that question of two different advisers on two different occasions. I got two different answers.
If they can't agree, what to do???
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Old Aug 6th 2011, 12:11 am
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Default Re: Simple tax question?

Your other post suggests you are a GC holder who has moved to spend time in Britain. In general, your tax situation is no different to that of a US citizen in the United Kingdom. Normally, you file your UK tax returns as normal, also file a US federal tax return as normal and claim exclusion for your UK foreign earned income and/or a tax credit for UK tax.

However you need to be very careful. As a GC holder, you should normally claim to be resident in the United States and claim foreign taxes as a credit against US taxes.

You still probably liable for state income tax as you don't have the same flexibility to claim that you have severed your domicile in that state that a US citizen would have (because you have to be careful not to lose your GC). Most states do not allow you to claim a credit for foreign tax.

Claiming to be non-resident in the United States can put your green card at risk.

You need to get some professional assistance from a tax practitioner who understands the special circumstances of US/UK tax.

Last edited by JAJ; Aug 6th 2011 at 12:17 am.
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Old Aug 6th 2011, 9:29 am
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Default Re: Simple tax question?

Thank you for the reply. Just to clarify, as far as I know, I am actually a dual resident I work in the us for about 5 months a year split into two periods in the autumn and spring. I spend the summer and winter in the UK. I know that I am liable for all taxes, state, federal and all the other deductions from my cheque, in the US (and to pay US taxes on my worldwide income) and my accountant there ( although not an expert in the dual tax situation) has been claiming credit for tax paid in the UK.
This question simply related to whether I can claim foreign tax credit in the UK for my state tax paid in the US as well as the federal tax, or just the federal taxes paid.
Since posting this I spoke to someone at HMRC who actually took some time to research my question and let me know that in the UK I can claim credit for both state and federal taxes paid in the US but not for all the rest. He quoted article DT19855 on the HMRC website. I have not been able to find this, the website always seems to time out before the search happens but I am going to take his word for it.
One thing is clear though, as you suggest I do need the advice of someone with expertise in this field.
The reason that I have not yet done this is that my husband who is a USC and spends all his time in the US prefers to use our current accountant and we seem to do better financially with the US taxes by filing jointly.
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Old Aug 6th 2011, 11:30 am
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Default Re: Simple tax question?

I highly recommend Pete Newton if you need a professional who is well versed in both UK and US taxes He is an expat that I found on here. I have recommended Pete to several people.

www.doug-tax.com
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Old Aug 6th 2011, 11:34 am
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Default Re: Simple tax question?

I also wanted to say that Pete is a really nice guy and always takes the time to go through everything and is very patient because I ask loads of questions and he always is timely getting back to me!
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Old Aug 6th 2011, 12:06 pm
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Default Re: Simple tax question?

Many thanks!
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Old Aug 6th 2011, 6:48 pm
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Default Re: Simple tax question?

Originally Posted by larrabee View Post
Thank you for the reply. Just to clarify, as far as I know, I am actually a dual resident I work in the us for about 5 months a year split into two periods in the autumn and spring. I spend the summer and winter in the UK.
Keep very good records and evidence of your travel, boarding passes, itineraries etc. Should you become eligible for citizenship in the future it is going to be crucial to work out and prove how long you have spent abroad.
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Old Aug 6th 2011, 10:21 pm
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Default Re: Simple tax question?

Good lord! I have not done that. Thank you very much for the information.
I may be able to rustle up the last two years itineraries but no go on the boarding passes. I have a note of all the dates of travel only from 2005. Naively, I just thought the respective authorities would know.
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Old Aug 7th 2011, 12:56 pm
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Default Re: Simple tax question?

Originally Posted by larrabee View Post
Thank you for the reply. Just to clarify, as far as I know, I am actually a dual resident I work in the us for about 5 months a year split into two periods in the autumn and spring. I spend the summer and winter in the UK.
You are in sort of uneasy situation. If you have a GC, it is assumed you are also a resident in the USA for tax purposes. If you on the other hand claim your tax residency in the UK, it goes against your GC. When you apply for your citizenship in the USA, you will be asked for US tax returns. And finally, I think when having GC, you can't leave the US for more than half year, or the immigration officers might confiscate your GC. So, saying you have a GC and want to be a USA citizen does not really go together with filing taxes in the UK.
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Old Aug 7th 2011, 2:10 pm
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Default Re: Simple tax question?

I did not say that I want to be a US citizen.
I responded to sir_eccles the way I did because I am grateful for any and all information on immigration matters and his input was helpful.
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Old Aug 7th 2011, 3:38 pm
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Default Re: Simple tax question?

Originally Posted by larrabee View Post
Since posting this I spoke to someone at HMRC who actually took some time to research my question and let me know that in the UK I can claim credit for both state and federal taxes paid in the US but not for all the rest. He quoted article DT19855 on the HMRC website. I have not been able to find this, the website always seems to time out before the search happens but I am going to take his word for it.
It's part of the HMRC discussion on the double tax agreements with the USA.
http://www.hmrc.gov.uk/manuals/dtmanual/DT19850+.htm
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Old Aug 7th 2011, 7:40 pm
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Default Re: Simple tax question?

Thank you very much for the link!
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