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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello, We are an American married couple living in Oxford.

Customer Question

Hello,
We are an American married couple living in Oxford. Both of us are employed in UK jobs and have no other source of income (we're not self-employed, no freelance work, etc.). We have a young son who was born here. We don't have any UK investments, but we do have a sizable amount of investments in US dollars with a US broker. We plan to file a US tax return for those investments. Do we have to file a tax return in the UK?
Thank you,
Lauren Janus
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me what type of income your US investments produce, eg dividends, interest on cash deposits, capital gains etc., and how much this is annually please. Are the investments held in joint names? What level of earnings do you each have in the UK?
Customer: replied 3 years ago.

Hi,


Thanks for getting back to me so quickly. We have approximately $800,000 in several Vanguard index funds. Most of these produce dividends, which are re-invested in the funds. We did sell about $15,000 worth of stock in 2013, which we just put into another index fund (so that's all of our capital gains, I believe).


 


The majority of the investments are held in both of our names, but we each have a Roth IRA, and I have a trust in my name worth about $100,000.


 


Thank you,


Lauren

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 3 years ago.

Hi again.

The basic criteria for completion of UK tax returns is here.

I'll give you the basic rules but I would recommend that you seek out some advice from a specialist in UK/US tax issues as without sight of the investment paperwork it will be pretty much impossible for me to assess the UK tax position for individual types of US investment or trust funds. The income from the IRAs which is the US equivalent of a UK pension plan should be outside the clutches of the IRS and HMRC, at least until you draw from them.

A UK national resident in the UK is taxable on their worldwide income and gains. Non-UK domiciled individuals such as yourself have a choice as to how you are taxed or not on non-UK source income as follows:

1 You can choose to pay UK tax on your worldwide income as a UK resident national would with credit being given for US tax paid on US source income under the terms of the UK/US double tax treaty.

2 If the non-UK source income is very small (less than £100), you can remit that to the UK and pay no UK tax on it. See paragraphs 9.11 to 9.14 of RDR1 here. You would not need to complete UK tax returns unless you wished to be taxed on the remittance basis. You can read about the remittance basis of assessment starting from page 54 of RDR1 here.

3 If the non-UK source income that you don't remit to the UK is less than £2,000 annually, you can use the remittance basis of assessment without having to complete UK tax returns unless you are a higher rate taxpayer and there is further UK tax to pay on the non-UK income that you have remitted to the UK or on your UK income. See paragraphs 9.15 to 9.19 of RDR1 here.

4 If the non-UK source income that you don't remit to the UK is £2,000 or more annually, you will need to make a claim to be taxed using the remittance basis of assessment by completing a self-assessment tax return. See paragraphs 9.20 to 9.28 of RDR1 here.

If you choose to use the remittance basis of assessment and you are a long term UK resident (7 of the previous 9 tax years) you may have to pay the remittance basis charge of £30,000 or £50,000 if you have been resident in the UK for 12 of the previous 14 tax years for any tax year that you choose to be taxed on the remittance basis. See paragraphs 9.29 to 9.35 of RDR1 here. You will also lose your entitlement to UK personal allowances which reduce your UK tax liability. See section 8 of RDR1 starting on page 51 here.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Expert:  TonyTax replied 3 years ago.
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