I am a US citizen (for now) who has lived in the UK for over 30 years and have dual citizenship. Very shortly, I will be renouncing my US citizenship however, I do have a US company pension of a little over $100,000. My plan is to wait until 2016 and possibly take the amount as a lump sum; withholding tax will be taken on distribution but I will owe no further taxes on the amount, except maybe in the UK. I can either leave the pension with the company or transfer it to an IRA before taking the lump sum. However, I need to transfer the amount to the UK but I'm unsure of the best and least expensive way to do this. If the pension is left with the company, I can probably arrange for the amount to be transferred to my UK bank account but the bank's exchange rate will be very poor. I could also open a US bank account (I have relatives in the US) and have the money transferred to that account, then use one of the money transfer web sites, such as TransferWise, to transfer the funds to the UK.
Question 1: does anyone have any thoughts about the best way of doing this?
Question 2: If the whole amount is transferred to my UK bank, will the UK tax authorities be informed of the deposit?
Replies (4)
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Why don't you have it transferred into a US$ bank account with a UK bank? That way you avoid what you believe will be a loss of value on exchange (although why you think that is not clear).
Why does the answer to question 2 matter?
Some of the assumptions built into the question are sadly incorrect.
As you are about to renounce US citizenship, the first and most fundamental question is whether you may be subject to the expatriation tax.
You will need to know for certain that all of your US income tax and informational returns were accurate for each of the five years 2010, 2011, 2012, 2013 and 2014.
Moving to the question about taking a lump sum distribution as a non-resident alien (whether from the existing plan or after rolling it into an IRA) you are incorrect in assuming that the withholding tax is a final tax or that there may be UK tax payable. In a practical sense as a non-US resident you may find it difficult to open an IRA within the United States.
Unless you are non-UK domiciled and electing to claim the remittance basis, remitting money to the UK has no UK or US tax effect.
It is unwise in my opinion to renounce without professional assistance given all of the traps built into the expatiation tax regime.
US site
Hey - just to let you know we have a US site :)
And a forum just like Any Answers
https://www.accountingweb.com/forum
Good luck!
Cheers.