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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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I live and work full-time in the US, but my wife

Resolved Question:

Hello,
I live and work full-time in the US, but my wife and daughter live here. My wife has two jobs here, but I send everything I can back to them for child and spouse support, which probably amounts to about 16,000 pounds annually. I have no income in the UK and have not since moving back to the US three years ago. I do visit them four times a year though, and, being a university professor, I am able to spend a little over three months per year with them here. After checking with HMRC again on this last year to be sure, I did not have to pay any additional tax here on the money I send back to them.
Two changes might change that tax situation here that I would like advice about. First of all, I have a small pension from a previous job here that would be about 400 pounds per month, which I would like to draw on a couple of years early and have deposited in my wife's current account here to help her pay the mortgage on our house. I am concerned, however, that I will then have to file a tax return here, in a situation where this year I have a unique windfall of income that will total at least $100,000.
So, my question is, do you think it advisable from a tax perspective to begin to draw on that pension now, i.e. is it likely that I would then have to pay some additional tax on that windfall income, even though I am being careful to save it separately in the US and not spend any of it on my family here? I continue to send them money from my salary in the US and my checking account only? Please advise me on what you would do in my situation.
Thanks,
Paul T.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Can you let me know the nature of the $100,000 windfall and where that will arise please. What job did you do that has given you a pension of £400 per month.
Customer: replied 1 year ago.

The windfall is from my personal share of income into a family limited partnership in my own family in the US; the source is the sale of coal on property belonging to the family.

My previous job was as a lecturer at a university in the UK and is with the University Superannuation Scheme.

Expert:  TonyTax replied 1 year ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 1 year ago.

Thanks, ***** ***** forward to receiving it.

Expert:  TonyTax replied 1 year ago.

Hi again.

I cannot see you having any problems so long as you maintain your non-UK tax residence status. Take a look here for information on the statutory residence scheme:

http://www.shipleys.com/resources/issue/statutory-residence-test

https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt

As you are currently non-UK resident, you are only normally taxable in the UK on UK source income. As your USC pension is not a government service pension which would have made it taxable in the UK if it was, it will be taxable on you in the US, not the UK. Take a look here for a list of government/non government service pensions:

http://www.hmrc.gov.uk/manuals/intmanual/INTM343040.htm

The windfall monies will not be taxable in the UK as they aren't from a UK source and you are non-UK resident for tax purposes.

The fact that you send money to your family in the UK does not make it taxable in the UK or you tax resident in the UK. Many people work abroad, some in dangerous places, they leave their families behind in the UK and send money home to pay the household bills etc. That doesn't cause tax problems.

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

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15846
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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