Foreign tax

Resident not ordinarily resident

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A UK citizen client has a house in the UK which he visits for 30 days annually

He has 2 UK pensions ( one taxed @ source) and a small self employed seasonal income.

He lives in the US for the rest of the year and receives a US pension on which he pays tax. Because he's married to a wealthy woman he pays at a higher rate of US tax ( US tax treats their total income as one unit)

He now wants to spend an additional 2 weeks - 1 month in the UK, which I believe will bring his US pension into the calculation.

Is it as simple as adding together his total UK + US income for tax purposes and combining the UK + US tax to calculate his liability

  OR

Am I missing something ( brain is not in gear today) ??

Replies (3)

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Scooby
By gainsborough
09th May 2019 16:13

Bernard, have you run through the residency tests first?
He may not meet any of the automatic overseas or UK tests if he is not working full-time, in the UK for over 46 days and has a home in both the US and UK (I am merging the two tests here for brevity but RDR1 & 3 have the full details!).

You would then need to check his ties to the UK & days spent in the UK to get his UK residence status and then the US-UK tax treaty (the concept of ordinary residence no longer exists).

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By jimmycta
09th May 2019 18:04

Bernard - a few points here.

I agree with gainsborough, you need to consider the Statutory Residence Test. Is there a basis already on which you think his US income will come into the UK tax net?

If (and it seems a big "if") that is the case, then you need to consider what his UK and US income is for *UK* tax purposes - i.e. what is taxed in the US does not necessarily equate to what should be taxed in the UK.

You would also need to consider what credit is available in a double taxation situation per the UK-US Treaty. It is unlikely that total UK tax + total US tax = actual tax liability.

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By bernard michael
10th May 2019 09:51

Thanks to you both

Further work will/can now take place

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