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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4883
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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US/UK Tax Treaty - having resided in the UK than 181

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US/UK Tax Treaty - having resided in the UK for more than 181 days I normally would owe the Revenue Service a tax return. However, my income derives from three American sources, an annuity paid by the federal government, rental on a house I own in California, and dividends.. The tax treaty specifies that an annuity paid to a retired government employee shall be taxed by the paying government, rather than by the country in which the individual resides; and that rental income received shall be taxed by the government within which the property is located. Separately I receive the equivalent of about 10,000 pounds from dividends. I file a tax return with the U.S. Internal Revenue Service, and the State of California. Am I also to file with the UK Revenue Service, although I presumably would owe no tax, given the treaty provisions?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Hello and welcome to the site. Thank you for your question.

Please advise -
Are you likely to continue your stay in the UK in coming years?

Many thanks
Expert:  taxadvisor.uk replied 1 year ago.

I am going to be out for the next 3-4 hours and will respond to your posting on my return.

Thanking you in anticipation.

Customer: replied 1 year ago.

Hello, in preparation to responding to my tax question you inquired if I'm likely to continue my stay in the U.K. in coming year. I replied to your question, and received yours to the effect you would be out for the next three or four hours, and would then reply. I've not yet received your reply. ???

Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

You'll need to fill in a tax return if:

- You're self-employed, a business partner, or director of a limited company;

- You're an employee or pensioner with an annual income of £100,000 or more;

- You have a pre-tax investment income of £10,000 or more;

- You're a 'name' at the Lloyd's of London insurance market;

- You're a minister of religion;

- You're a trustee or representative of someone who has died.

Although you are in receipt of rental income and annuity paid by Federal Government in USA and both are taxed in the USA, as a UK resident you would have to declare the dividends received and rental income on your UK tax return by completing supplementary pages SA106 – Foreign.

More information on this can be found on pages FN6 (dividends from foreign companies), FN7 (overseas pensions, social security benefits and royalties, etc) and FN8 (income from land and property abroad) here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/420047/sa106-notes-2015.pdf

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Expert:  taxadvisor.uk replied 1 year ago.
I did not receive a relpy to my initial info request although you state you replied.

When you declare foreign income on supplementary pages SA106, you would also claim foreign tax credit relief against tax suffered on said income in USA.

I hope this is helpful.
Customer: replied 1 year ago.

Sorry for the confusion. Apparently my initial reply went awry. Re the question, am I likely to remain in the UK, the situation is flexible. My wife and I are retired, owning and maintaining homes in the UK and the US The EEA Treaty permits my wife (a German citizen) to reside in the UK in retirement, and also allows her to be accompanied by her non-EEA spouse. The Home Office acknowledges my status, but notes it's dependent upon my wife maintaining treaty status. In the meantime I spend about 2500 pounds a month while in the UK, to cover expenses.

The funds come from the annuity and rental income described in the initial question as falling under the US/UK Tax Treaty, with the exception that some of my equities pay dividends, which I do not receive, but are reinvested in additional shares. Its the latter, which presumably would be characterized as income, which lead to my question concerning whether or not I'm required to file a tax return.

I do not fall within the categories listed in your earlier reply, as automatically required to file a return.

Appreciate any incites/guidance you can offer.

Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply...

Based on information given, you would be best advised to file a tax return as you are also remitting funds to the UK to live on.

Reinvestment of dividends to buy additional shares is stiil chargeable income and should be reported.

My understanding from your question was that you have dividend income of c. £10k.

I hope it is helpful
Customer: replied 1 year ago.

Thank you. At tax time in the U.S. I use a Turbotax program, which guides me through the related tax forms and files the result on my behalf, is there a similar program in the U.K. which I can buy/use?

Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply..

I am not authorised to recommend any third party software. HMRC allow you to file your tax return online free of charge. You have to register for this service.

I use a combination of paper returns and third party software for my clients.

The alternative is to download the self assessment tax return form from HMRC website and file papaer return. Your deadline for filing paper return for tax year ended 5 Apr 2015 is 31 Oct 2015 and for online filing is 31 Jan 2016.

I hope this is helpful.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4883
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer.
Your reward of a generous bonus is greatly appreciated.

Best wishes.
Customer: replied 1 year ago.

Your advise certainly is worth the "bonus".

You mentioned that I should "...file a return as you are also remitting funds to the UK to live on." Would you go further into the implications relating to the latter. One would think that bringing money into the UK would be a positive, rather than a tax question.

Also, what is the level of income which requires filing a return, and is the level the same for single or married person.

When I file my US return I indicate married, filing jointly. Is there a similar situation here, wherein I/we can benefit?

Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply...

An individual who is UK resident but non domiciled in the UK don't pay UK tax on foreign income or gains if the income is less than £2,000 in a tax year and you don't bring them into the UK.

If the incoem or gains are £2,000 or more then you can opt for paying UK tax on that income on remittance basis.

This is explained here

https://www.gov.uk/tax-foreign-income/non-domiciled-residents


In the UK, there is separation taxation i.e. you file your tax return as an individual and not jointly as in the USA.

I have highlighted levels/types of income that reyuire you to file a tax return. You can use the tool here to check if you need to fill in a self assessment tax return.

https://www.gov.uk/check-if-you-need-a-tax-return


I hope this is helpful
Customer: replied 1 year ago.

So, no marital advantage, no wonder the younger people are just living together. Ha! But, that leads to another question.

My wife has lived in the same house for over forty years. She was a horse woman, and still maintains two mares, with stables, and the five acre paddock. The latter and the house initially were acquirement because of her desire to have horses as pets. The present two are 18 years old and have never been ridden. Now a developer would like to buy the property. We are somewhat interested, but only if net gain would handle taxation, fund a similar place elsewhere in the nearby UK, and leave some money for retirement years. We understand gain on the house and up to a half-hectare would be tax free. with a possibility of including all or part of the acreage as integral to the home. The paddock has always been part of the home, the animals never commercial, but rather for my wife's enjoyment. Any thoughts on the likelihood of the paddock being accepted as part of the home for tax purposes?

Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply.

Your question is unrelated to the original question and you should put a new question per JustAnswer rules.

The size of the land would be seen as greater than the permitted area.

On this occasion I will provide you a link to what qualifies for private residence relief here

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief



I hope this is helpful

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