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UK USA tax rights

Help with USA UK dual citizen tax return

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I am approached by someone who is UK resident and USA resident (taxed worldwide income in both countries) and is deemed domiciled in UK. The client is also dual resident. I understand that he is habitual abode is USA and therefore USA have taxing rights.

My question is that when completing his tax return:a) do i need to complete HS302? and also if USA has taxing rights due to his nature of abode, does he need to declare his USA income in UK tax return? Am i missing something here?

My understanding was put in his worldwide income, any USA income will go under foreign pages , deduct tax at source and any extra UK tax he just pays? Or is there more to this?

Replies (8)

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By Tax Dragon
26th Mar 2019 06:55

I'd start by (reading the notes to and) completing HS302. See where that takes you.

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By Tim Vane
26th Mar 2019 08:00

Worry only about the UK position. Tell him to seek advice elsewhere on the US taxes. Run the SRT. Read the DTA. That will give you a start point.

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By pjhorn
27th Mar 2019 10:27

Notwithstanding the special way in which the USA would tax him if he were a non-resident citizen/green card holder, the basic position is that he will be primarily taxable in one or the other - not both the UK and the USA.
He needs to be clear whether he is US tax resident under US domestic rules (and let's say he is) and you need to be clear whether he also UK tax resident under the SRT. Assuming he appears to be tax resident in both, you then need to look at the 'tie-breaker' rules in the UK-USA DTA (Article 4). Once a decision is made under those terms, one or the other becomes the place of tax residence for international tax purposes. If it turns out to be the USA, then you fill in his UK tax return as a non-resident. If it turns out to be the UK, then his worldwide income and gains are taxable here and he will need advice in the USA (or in the UK from a suitable firm) as to how he declares there.
I haven't considered domicile but you say he is UK deemed domiciled (and it's only UK domestic rules under the SRT which dictate that under the 15 out of 20 years rule etc).

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Replying to pjhorn:
By Tax Dragon
27th Mar 2019 11:20

pjhorn wrote:

If it turns out to be the USA, then you fill in his UK tax return as a non-resident.

Maybe a bit simplistic. I prefer HMRC's, "An individual who is 'treaty resident' in the other country is entitled to make claims to relief from United Kingdom tax as provided for under the agreement on the basis that they are a 'resident of' the other State."

The HS302 is there to help. Use it.

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By Expat24
27th Mar 2019 10:30

You do not say if he is a US citizen or greencard holder. You need to determine his treaty residence status under Art 4 via HS302 and if this falls to the UK, but he is a US citizen, then you need to be aware that the treaty relieves certain income from UK tax under the savings clause. It's a complex case so best get expert help or refer it to someone who does this type of work!

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By johnjenkins
27th Mar 2019 10:58

We have a few clients who had this problem. However after taking specialist advice we were told that any income arising from USA and paid in USA should be taxed in USA. Any income arising from USA or UK paid into UK should be taxed in the UK. As yet (11 years) we have had no challenges.

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Replying to johnjenkins:
By breakaway.barry
27th Mar 2019 12:12

Up until recently, my wife has been a dual national of the US and the UK but has been resident in the UK since a child, only having visited the US for short holidays. Although non-resident, as a US citizen she has had to file US tax returns every year and continued to be liable to US taxes on her worldwide income. The US have allowances for foreign earnings and double taxation but it is a complex area and needs specialist advice. Gift/Estate/Inheritance Tax is another area that requires specialist planning.

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By David Treitel
02nd May 2019 18:42

I'd be happy to chat about the details here.

PS – Curious about Meghan, the Royal Baby and Tax? Did you catch my recent interview on CNN? You can view and read about it here:

With kind regards

David Treitel | Managing Director | American Tax Returns Ltd
The Old Exchange, 12 Compton Road, London, SW19 7QD

Tel: 020 3542 6330

Email: [email protected]

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