Non Resident Tax Query

BritRael

jimmo wrote: »

I have to say that this is really outside of my comfort zone but I have the feeling that BritRael is not necessarily wrong.
As a non-resident he is only assessable to UK Income Tax on income arising in the UK...

Correct. As stated earlier, this is only interest on savings held in the UK, which is paid free of tax after filling in the R85 (I think thats the correct number) form.

jimmo wrote: »

..He may have received “approval” to receive his rents without deduction....

Correct. But for me this was only a theoretical question; I was considering getting into the letting game but was concerned about the tax implications. In the end, I decided it was too much hassle to do it remotely as I get back to the UK so little.

BritRael

Cook_County wrote: »

Britrael

You are somewhat confused & your advice is flawed.

The 90 day test is non-statutory although all of the professional accounting & tax bodies are pressing for a statutory residence test. It has certainly not recently been introduced as you imply! ...

I didn't state that the 90 day rule had recently been introduced. I said the timing had changed; it used to be a year, however, it is now a full tax year i.e. if you start a new job working overseas on the 7th April you would not start counting your days (to be eligible for non-resident for tax purposes) until the start of the following tax year as you have just missed the start of this one. Is that clearer for you?

Cook_County wrote: »

The 90 day test is certainly not a carte blanche exemption from UK tax either...

Nobody said or implied that it was.

Cook_County wrote: »

You continue to refer to the IRS rather than HMRC. Why?

Just to confuse you

But seriously, are you telling me that you cannot understand that acronym? Its probably due to all the American news I'm forced to watch nowadays. BTW, I also say vacation instead of holiday and movie instead of film. I'm just sooo cosmopolitan.

Cook_County

BritRael wrote: »

I didn't state that the 90 day rule had recently been introduced. I said the timing had changed; it used to be a year, however, it is now a full tax year i.e. if you start a new job working overseas on the 7th April you would not start counting your days (to be eligible for non-resident for tax purposes) until the start of the following tax year as you have just missed the start of this one. Is that clearer for you?

.

The last time this changed was from 17 March 1998, when the Spice Girls forced the abolition of the 100% Foreign Eanings Deduction for everyone except for seafarers. This was 10 years ago so is not a recent change in the timing. Which section of the Taxes Acts are you thinking of? Are you perhaps thinking of the new statutory day counting introduced by Finance Act 2008?

Cook_County

BritRael wrote: »

Correct. As stated earlier, this is only interest on savings held in the UK, which is paid free of tax after filling in the R85 (I think thats the correct number) form.



.

Again the UK tax system is a tad more complex than you think. The liability for non-UK residents on UK source income is limited to what it would be if:

Tax on what is known as 'disregarded income' were restricted to tax withheld, deducted at source, or given as a credit, and

Any personal allowances otherwise available were not made.

The effect of the above rule is that generally interest and dividends are exempt from UK tax for a non resident - but only in a complete year of non-UK residence. They will in most cases, however, be fully taxable in the other country where one is now resident.

BritRael

Cook_County wrote: »

Again the UK tax system is a tad more complex than you think. ....

Again, you are missing the point; I did not say that everybody can fill in an R85 form and get tax free interest, I said that I filled in an R85 form and get tax free interest because I have been non-resident for tax purposes for 20 years. Phew...are you a tax man by any chance?? Or do you just like being hyper-critical?
FYI, I am an Expat, and I only look into tax situations that directly effect me. I certainly do not profess to be some fountain of tax knowledge...

Cook_County

Someone non-UK resident can file a Form R105 (not R85) which can be found here: http://www.hmrc.gov.uk/nonresidents/fagr105.shtml

If you file a Form R85 then yo would be doing so in a potentially fraudulent manner because this is only suitable for UK residents.

Scr00ge

jimmo wrote: »

Letting the house now
As you are already letting it the person(s) liable to tax on the profits are the beneficial owners. Whilst you are the legal owner there are significant arguments that for married couples the beneficial ownership is actually joint. Just to explain that, if you were to divorce would you expect that, as far as the house is concerned you would keep the house and your wife would get nothing?

Jimmo - I am really interested in the comment about beneficial ownership. I am living abroad with a rental house in the UK, where I am the listed owner. On my tax return for the last tax year, I have said I am the owner of the house, but ideally I would like to show it as joint ownership with my wife, so I can use both of our tax-free personal allowances. Everything I have read does not make it clear as to what the IRS means by "owner".

Can you help out on the above?

Thanks.

Cook_County

From a US tax perspective the US taxes you jointly on worldwide income so it does not matter if you reduce your UK tax because all you would do is reduce the amount of foreign tax credits you can claim in the States & thus increase your overall US tax bills.

I do not believe the IRS would agree with you if you took the position you are suggsting and your US returns were audited.

Scr00ge

Cook_County wrote: »

From a US tax perspective the US taxes you jointly on worldwide income so it does not matter if you reduce your UK tax because all you would do is reduce the amount of foreign tax credits you can claim in the States & thus increase your overall US tax bills.

I do not believe the IRS would agree with you if you took the position you are suggsting and your US returns were audited.

Thanks for this, Cook... What I failed to mention in my above post, is that whilst I am living and working in the USA, my company pay all my USA tax, but not my UK tax. Therefore, as you say, it would not matter in a normal situation, but in my case if I can reduce my UK tax (even if it increases my tax in the USA), then I am better off.

Why don't you think the IRS would agree? I was picking up on the point made earlier in this thread about what the situation would be if my wife and I were to divorce. However, I have looked through lots of HMRC stuff to try to clarify it, and it seems to be a very unclear area.

Cook_County

I do not think the IRS would agree because it is contrary to the IRS code as you do not both have legal ownership.

In any case it seems you are tax protected to a theoretical home country liability - unusually your tax protection includes personal income (I have never this is practice - it is truly exceptional) so if you are right you can ignore US income taxes entirely because you pay just a theoretical home country liability on personal income plus presumably a hypothetical home country withholding tax on employment income.

The better answer overall must logically therefore be to maximise UK pension contributions.