Tax Rebate on Leaving the UK to US
 

Hi,

The time is almost upon me, I am moving to the US this Sunday on a intra-company transfer.

I have a question regarding tax rebates which I have been unable to find the answer to.

"When you ask for a rebate do HMRC simply look at how much tax you have paid year to date and then return the excess you have paid without consideration if you are going to work abroad?"

The reason I ask this as it seems almost like free money, as the US and UK have a tax treaty I would assume they would take the fact I am still going to be working that I should not get tax paid. The reason being that I would have earnt roughly the same amount in the US ytd and paid the same tax.

This is based on me getting a P45 by my employer which is not 100% clear as although I am still being employed by the same firm I will be based in the US and paid through the US payroll so assume HR will issue me a P45.

Please don't say ask my employer as I have tried but it is like pulling teeth.

Thanks!

Re: Tax Rebate on Leaving the UK to US
 

It's not free money. Your annual personal allowance of income before tax starts to be applied is available in full for each tax year irrespective of whether you are tax resident in the UK for one day or 365. But when working out your PAYE at each pay period, that allowance is pro-rated, so when you leave the UK next week you'll only have had about 1/3 of that allowance applied. When HMRC receives your P85 they'll be able to take the unused portion of that allowance into account and will probably find you've overpaid. Also, if you're a higher-rate taxpayer, unless you're earning megabucks, there's a good chance that your income for only a third of the year won't have reached the higher-rate threshold but you will have been taxed at that rate so should get that difference back.

You should get a P45 from the UK end of your company and you should submit that with the P85 to confirm you've left employment in the UK. Don't be surprised if HMRC want to wait until the end of the UK tax year next April though, to make sure you really don't get qny more UK income for the rest of the tax year.

Re: Tax Rebate on Leaving the UK to US
 

I was inspired to make a spreadsheet to illustrate the basics, it assumes 30k salary, 6k allowance, 25% tax rate, for simplicity. The second table assumes working till end of August. Hope it works - never tried attaching excel!

Re: Tax Rebate on Leaving the UK to US
 

Thanks guys, I know how it would work I just assumed that because there is a tax treaty with the US there could be complications but it appears not.

Re: Tax Rebate on Leaving the UK to US
 

Wife filled in a P50 and got the refund 6 weeks later. YMMV.

Re: Tax Rebate on Leaving the UK to US
 

From a US perspective you may election under IRC section 7701(b)(4) to file as a full year resident from 1 January 2014 and therefore include pre-arrival income on your 2014 US return. You would do this if it saved you tax.

Re: Tax Rebate on Leaving the UK to US
 

A married person might do, in order to enable filing married/jointly instead of married/separate or head of household. Not clear why an unmarried person would ever want to make that election.

Re: Tax Rebate on Leaving the UK to US
 

Many unmarried folks would make this election to utilise capital or rental losses arising before moving to the States and - most importantly - to maximise excess foreign tax credits carrying forward.

Re: Tax Rebate on Leaving the UK to US
 

Does this table work if you put in lower salary figures?

Re: Tax Rebate on Leaving the UK to US
 

Not really. I just knocked it up. But if you change the numbers in the top row, the Jan figures should calculate.

eta If anyone cares, I'll make a more interactive version.