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Topic: 401k plans and corresponding approval  (Read 1603 times)

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401k plans and corresponding approval
« on: August 23, 2003, 01:27:00 AM »
Hello Helen,

I have questions regarding 401k plans and "corresponding approval" here in the UK.  

My tax advisor tells me I have to prove that my US plan has corresponding approval here in the UK so I can take it off the top line figure of my salary before taxes.

Currently I have a 401k plan with my US employer and here in the UK and so far I have not been able to claim the amounts as pre-tax amounts with Inland Revenue (even tough I have to contribute the monthly amounts and suffer the exchange rate fluctuations).  

My tax advisor said I have to have corresponding approval.  It is compounded by the fact that this has been the case since I arrived here in August 1999.

One of my main concerns is that when I eventually get back to the US, I will carry on contributing into the plan, but when that day comes and I retire, the IRS will tax me on the total  amounts I have contributed into the plan.  This is in spite of the fact that I already paid income tax on the amounts while I was in the UK.

Can you offer any advice in this area, including how to reclaim any tax credits from Inland Revenue I might have coming?

Thank you for your help.


Re: 401k plans and corresponding approval
« Reply #1 on: August 25, 2003, 03:33:24 PM »
Hi

Your accountant is correct.  You will not be able to reduce your gross income by the amount of 401K contributions for UK tax purposes unless you have corresponding approval from the UK.  It is common to get this approval from Inland Rvenue. You accountant will have to review the 401K plan and write to the IR for approval. If you intend to be in the UK for a few more years, it is worth doing this.

In the absence of this, there is really no way out of paying tax on it in the UK.

 


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