This should be a straightforward matter but I would appreciate any views from those who have experienced a similar situation.
I have a new client who is a UK national but has been a USA resident for a number of years. His UK sources are the state pension & 2 insurance company pensions which he has declared in the USA so has had no dealings with HMRC for some years.
In 2014-15 he became a member of a UK property development partnership with other UK based members so I’ve registered him for Self Assessment as I don’t think there’s any question that he will be taxable in the UK on his share of the partnership profits.
However my client contends that he does not need to declare his 3 pensions on his UK return as these have already been declared and taxed in the USA.
As a UK national he will be entitled to the personal allowance and my thinking is that he will have to declare the 3 pensions to determine whether any allowance is available against profits and the rate(s) of tax applicable.
I can’t see any mechanism to accommodate this scenario without the pensions being taxed again in the UK.
I’ve trawled through the HMRC website but that’s a bit woolly & hasn’t helped me much.
Replies (6)
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There's a handy US expert that prowls these forums
I think he's called David Treitel; I'm sure he'll pop along to advise at some point.
Have you read the UK/US DTA as that may provide you with more insight.
Hopefully your client has considered US reporting on Forms 8865, 8938 and FinCEN 114; and you feel comfortable assist him with annual US reporting in relation to the UK partnership such as providing annual Forms K-1 or pro-forms K-1s so that he can complete his US returns each year. If there is a profit during 2015; your client will want to pay the UK tax by 31 December 2015.
You may also want to ensure the client provides you with his certificate of coverage so that you have evidence that he should not pay UK NIC.
I am sure that the helpful young lady at HMRC's technical section made a point of mentioning all those things when she provided the solution to the problem David. :)