Relocation to Texas - No benefit in kind on £8000

[benmc]

Hi

Just completed our US visa approval and will be moving to Texas for a few years.

I understand I am allowed to incur £8,000 of relocation expenses without it being considered benefit-in-kind and have no reporting requirements.

About £5,000 of that will be taken up with removal expenses.

Can the remaining £3,000 be paid as a lump sum by my employer.

Regards
Ben

[LC23]

If you are moving to the US to work full time for a number of years with limited visits back to the UK, then you will almost certainly break UK tax residence. As such you do not need to consider the UK tax rules on this payment as it relates to your move to the US and is not taxable in the UK.

You need to instead consider the US tax rules on relocation costs/payments. Note there is a Federal and State tax system in the US, however Texas has no State taxes so you just need to determine the Federal position.

As you are moving with work have they offered you tax advice as part of the overall relocation package?

[benmc]

LC23 - Thanks for that.

Slightly confusing then. I had assumed that the cost of shipping goods would be incurred in the UK while I am still an employee of a Ltd company and therefore liable to UK tax rules.

Yes, I can get help with these tax questions, but I need to know the questions to ask.
Ben

[LC23]

It's not about where the costs are incurred, it is about what they relate to. As they relate to the move to work in the US (and you will likely break UK tax residence) then they are only taxable in the US, subject to their tax laws on this.

Are you moving to a local hire contract in the US or will you remain employed by the UK company?

[benmc]

Moving onto a US contract

[LC23]

OK some general points to cover off both on the package front with your employer and the tax and social security front (although any good expat advisor will walk you through this and will know the questions to ask you on the tax aspects):

1.What will happen with my UK pension/s.
2.If your company has share/stock plans then how will any that are currently being participated in be affected.
3. What private medical/dental coverage is being offered in the US (this is tax deductible for US purposes).
4. When can I enter the US pension plan (likely a 401k scheme).
5. Should you make voluntary NIC contributions as you will go into the US system whilst in the US (FICA/Medicare).
6. Apart from relocation are there any other additional payments that will be made to move you to the US.
7. How will personal income (bank interest, investments, rental income) etc. be taxed.
8. What will my net income be in the US.

[benmc]

LC23

Thanks for the guidance. Got most of those answered we and now down to the little details and I was just trying to work out how to minimise the tax liability.

I work for a smaller company which has the advantage that there is flexibility on how we do things.

Ben

[LC23]

If you haven't already, please make sure you speak to someone who knows the US tax system. Once you are resident there they will tax your worldwide income. If you are non resident for the first year then you will be taxed on US source income only for that year. You also need to consider whether to file a joint income tax return assuming you are married.

[jeff m2]

Surely the 8K would be considered reimbursement of incurred relocation expenses.
Assuming you can account for all or most of it it should not be liable to US income tax.

Usually it is preferable to file jointly for FIT as one can avail of spouses personal allowance.