Relocating and the tax man
Discussion
Hi Guys.
Im potentially looking to reloacte with work to our San Francisco office in the next few months.
I will be having a session with a Tax consultant in the next few weeks, but I have a few hoops to jump through first before work introduce me to my accountant.
I wanted to find out anyones experiences when moving to the US.
my HR rep says I may end up paying tax on my income here in the UK and in the US in the first year, can this be right?
Can I expect to move there and earn less due to taxation?
Im potentially looking to reloacte with work to our San Francisco office in the next few months.
I will be having a session with a Tax consultant in the next few weeks, but I have a few hoops to jump through first before work introduce me to my accountant.
I wanted to find out anyones experiences when moving to the US.
my HR rep says I may end up paying tax on my income here in the UK and in the US in the first year, can this be right?
Can I expect to move there and earn less due to taxation?
LC23 is the overseas tax expert on PH.
If you are out of the UK for a full tax year I.e. from 6 April to the following 5 April), you will not be liable to UK tax on income earned abroad.
You are allowed return to the UK within the tax year for short periods. There are time limits that define how long you can return to the UK during any given tax year and youi do need to be careful.
If you are away for a period less than a UK tax year, you are, in theory, still a UK tax resident and liable to UK tax on your worldwide income. However, there are concessiomns which allow a person to be subject to UK on the income earned when they were actually working in the UK only (known as "Split Year Treatment").
HMRC guide is here -
http://www.hmrc.gov.uk/cnr/faqs_general.htm
You may also need to look at the NIC situation as well, especially if you intend to return to the UK at a later date and eventually retire here.
If you are out of the UK for a full tax year I.e. from 6 April to the following 5 April), you will not be liable to UK tax on income earned abroad.
You are allowed return to the UK within the tax year for short periods. There are time limits that define how long you can return to the UK during any given tax year and youi do need to be careful.
If you are away for a period less than a UK tax year, you are, in theory, still a UK tax resident and liable to UK tax on your worldwide income. However, there are concessiomns which allow a person to be subject to UK on the income earned when they were actually working in the UK only (known as "Split Year Treatment").
HMRC guide is here -
http://www.hmrc.gov.uk/cnr/faqs_general.htm
You may also need to look at the NIC situation as well, especially if you intend to return to the UK at a later date and eventually retire here.
Read up on US tax as well - no idea how it works for immigrants, but US citizens are hounded worldwide for all income earned, even if they or the investment are offshore. I am 90% sure this applies to Green cards as well (had a FATCA session with E&Y on the very same this lunchtime).
JonX2C said:
Hmm looking at this double tax thing though im not sure if I will be hit with double tax, as I will be re-employed by my company in the US if I move there. So I would be being paid and working in the same country.
Would I still have to pay UK tax?
Have you read the link I posted?Would I still have to pay UK tax?
[quote=Eric Mc]LC23 is the overseas tax expert on PH.
quote]
Thanks Eric.
OP - assuming your company is using one of the Big Four firms or someone who trained/has worked there then they should be well placed to give you all the advice you need in the UK and the US.
Bottom line is you will not be doubly taxed whether or not you break UK tax residence as even in a worst case scenario, the UK will credit the US taxes.
If you are really interested in this then read HMRC6 - there are a few versions out now even the current one needs updating again although this is not yet out in the public domain. Nothing substantial but a few bits and pieces they have got wrong.
More than happy to have a chat with you if you want some pre meeting advice - I have done both UK and, to a lesser extent, US (including California State) tax returns. I would also suggest that you ask your company to use a good expat tax advisor - I have seen some horrors where they have used the wrong person. This is a niche area and there aren't that many firms that can actually deal with this properly.
quote]
Thanks Eric.
OP - assuming your company is using one of the Big Four firms or someone who trained/has worked there then they should be well placed to give you all the advice you need in the UK and the US.
Bottom line is you will not be doubly taxed whether or not you break UK tax residence as even in a worst case scenario, the UK will credit the US taxes.
If you are really interested in this then read HMRC6 - there are a few versions out now even the current one needs updating again although this is not yet out in the public domain. Nothing substantial but a few bits and pieces they have got wrong.
More than happy to have a chat with you if you want some pre meeting advice - I have done both UK and, to a lesser extent, US (including California State) tax returns. I would also suggest that you ask your company to use a good expat tax advisor - I have seen some horrors where they have used the wrong person. This is a niche area and there aren't that many firms that can actually deal with this properly.
Ok, well I moved to Montreal last week and basically we had to establish whether I was a permanent resident of Canada or not (Have I moved my personal effects over, am I moving money, do I have a house in the UK, etc?)
I imagine the process is similar for the US? Either way, I'd relax and leave it to your tax consultants, they are very good at what they do
I imagine the process is similar for the US? Either way, I'd relax and leave it to your tax consultants, they are very good at what they do
The US residence test is actually pretty straighforward. You are either a US citizen or Green Card holder and taxable on worldwide income and if you do not fall into this then you are either a resident or non resident alien. Residence is based on a pure day count test (Substantial Presence).
Substantial Presence Test
You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.
There is also California residence to consider and each State has its own tests. Highly likely to be CA resident if living and working there and also resident for Federal purposes.
Substantial Presence Test
You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.
There is also California residence to consider and each State has its own tests. Highly likely to be CA resident if living and working there and also resident for Federal purposes.
LC23 said:
The US residence test is actually pretty straighforward. You are either a US citizen or Green Card holder and taxable on worldwide income and if you do not fall into this then you are either a resident or non resident alien. Residence is based on a pure day count test (Substantial Presence).
Substantial Presence Test
You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.
There is also California residence to consider and each State has its own tests. Highly likely to be CA resident if living and working there and also resident for Federal purposes.
The OP should be clear that if he sells anything anywhere whilst a green card holder he will have to pay the IRS tax.Substantial Presence Test
You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.
There is also California residence to consider and each State has its own tests. Highly likely to be CA resident if living and working there and also resident for Federal purposes.
Bing o said:
The OP should be clear that if he sells anything anywhere whilst a green card holder he will have to pay the IRS tax.
If you are a Green Card holder it is not just capital gains tax you have to consider. You will be liable to US Federal tax on ALL income/gains regardless of where you are in the world. This does not mean there will be double taxation, just that there is always US tax in the background. However, that is based on obtaining a Green Card. If you are just a resident alien then you can break that residence when you leave the US.Gassing Station | Finance | Top of Page | What's New | My Stuff