Off Shore Accounts

Hello all!

I'm curious if any of you might be able to help me with a question I have about USA/UK Income Taxes.  I will be retiring from my police officer job here in America next year and plan on moving to the UK.  I have dual citizenship with the USA and the Republic of Ireland, so I don't anticipate any immigration or legal trouble obtaining work if I decide to look for employment while I'm retired.  However, my problem is this:  My pension from the State of New York Police/Fire Retirement System is subject to US Federal Taxes, and can be direct deposited in any bank in the world, so long as that banking firm has a branch somewhere in the USA.  While it's true, I'll be enjoying my retirement in the UK, I don't mind paying USA Internal Revenue taxes on my pension, but I don't want to have to pay UK Inland Revenue taxes on this money as well.  It's not that I don't want to sherk my responsibility as a British resident and/or rate payer, but I don't think it is fair I would have to pay taxes in two places on money I earned while living in the USA.  If I pick up a part-time job while in the UK, I would gladly pay the UK their taxes on that income, but as I said, I don't think it is fair to pay taxes on the pension I earned while living in New York.

Therefore, my question is this:  Would an off-shore account like those offered by HSBC Bank help allieviate this problem?  For instance, the New York State Police and Fire Retirement System has already told me they can direct deposit my monthly pension cheque in just such an account with out any problems on their end.  If I elected to let them do this, would I still be responsible to pay UK Inland Revenue taxes on this monthly pension cheque?

I appreciate everyone's time in hearing me out, and if anyone can give me some advice about my predicament, I'd be most grateful.

Thanks!

Brian

This is a common question. There is a tax treaty between the US and the UK so you'll be able to avoid double taxation,
tax you pay in one country can be used as a credit towards tax on the other. Be aware that as a US citizen you'll always
have to file a 1040. The offshore account thing won't work as a way to avoid any tax; as a US citizen you will be taxed on
your world wide income, I'm not sure how the Irish citizenship affects your UK tax position, there are different rules
for resident vs non resident, but if you are a UK resident you'll also be tax on world wide income.

I'm in a similar situation, UK/US dual national retiring from the US to the UK with a Massachusetts state pension. I have a
general idea of how I'll be taxed, but things can get complicated fast. I'd recommend you look at the IRS and HMRC
websites, to educate yourself as to the way the IRS taxes its citizens abroad and how this will mesh with the HMRC
regulations. Once you have some general understanding go to a professional advisor. With some knowledge you'll
be able to assess their advice.

I know nun is trying to help out, but his/her post contains several misconceptions.

There are several points that are worth sorting out and getting dual US/UK qualified advice on BEFORE moving to the UK.

1. Generally speaking individuals domiciled outside of the UK (such as Brian is most likely) are only ever taxed on income and gains that arise in the UK and Republic of Ireland or are remitted to the UK.  So in most cases having the pension paid ultimately into the UK would make it taxable in the UK (nun is quite wrong in suggesting that the UK taxes worldwide income for residents).

2. You need advice therefore on residence, ordinary residence and domicile.

3. Despite the statement above, the US/UK double tax treaty does exempt some kinds of pensions from US tax if (and and only if) remitted to the UK.  You need advice if this might save you tax globally and when and how to move the money.

4. Even more fun, government pensions are subject to quite different rules under the treaty, so you'll need advice on whether your pension falls into the regular pension or government part of the treaty.

5. Remittances by non-UK domiciliaries are deemed to be paid net of US taxes.  This makes the calculations beyond the maths capabilities of most of us, (especially because the tax years are different) so you'll need practical help in preparing the US and UK tax returns.

6. Holding bank accounts offshore does of course add to the costs of having your Will probated after you have gone.  Moving countries is always a good time to check Wills, especially since the UK has pretty much made US trusts or living trusts things to be avoided at all costs after last weeks Budget.

Thank-you both for your replies, but I'm afraid I am now more confused than ever!  Does anyone know of an accountant in the UK - preferably in the Liverpool/Merseyside area - who specialises in Dual Citizenship Americans and government pensions being drawn from abroad?  Thanks again!

I haven't heard of one near there.   Try Google Local and see if one pops up.  They're mostly in London and environs.  Do a websearch for Expatriate Tax and you should get dozens.  Make sure the firm/entity/company handles consulting on pensions and US/UK treaty, and handles both US and UK tax.

I think you need to find out how the situation regarding UK/US/Eire residency and domicile.
Will you be making your permanent home in the UK, buying a house
etc or do you have family there? What are your reasons for choosing to retire in the UK.
Once you answer those I think you'll be able to apply the residency/domicile rules which
should be the starting point for your tax planning.

There is a provision that UK or US state penions like social security are only taxable
in the state where you're resident. I'm not sure if this applies to NY state pensions.
Maybe a place to start is to ask if NY, like MA, abides by all the US Federal tax
treaties and if the Federal government sees them as a similar benefit to SS.

Also if you don't know find out if your NY pension is free of state tax.