Unusual tax situation

Hi all,

I am a dual USA/UK citizen. I am moving back to England and was fortunate to get a transfer with my company (big 3 US Defense contractor). They are going to continue paying me in US Dollars to my US bank account. I will also be continuing to keep our house here in the US and will rent it out. So in summary I am still going to be paying both fed and state taxes (VA) as normal.

Are there any problems with this on the British Governments side of things ?.

I don't want to get into a situation where the Brit Govt wants a cut as well. I hope I am right in saying that I don't think thats the case because as I previously said I am still being paid in US dollars to my America bank account as a US citizen ?.

I will just transfer the money over on a bi weekly or monthly basis to my UK account.

Any advice would be appreciated.

Thanks

.

1. You are right that you are continuing to have ongoing Federal & Virginia tax liabilities.
2. If you are performing all of the work in the UK then the income is primarily entirely taxable in the UK, although you'd be able to claim the benefit of the foreign earned income exclusion, foreign housing exclusion and foreign tax credits in the US.
3. Reading your previous posts you may well still be domiciled within the UK given how difficult it is to shake off a domicile of origin, so the UK would tax you on worldwide income once you are UK resident.  You'll need to review the UK tax situation on other savings in the US before moving over.
4. Your employers should operate PAYE if they have a UK presence of any kind already, there are other compliance issues that the employer would want to take care of given that English employment law would apply once you are in the UK.  Will your employer provide tax assistance given that they want you here?

Guya,

Thanks for the info. my employer will not be using PAYE in my case because they will be taxing me as if I was still living and working in America. They are telling me that this is perfectly fine and normal ?

How will the British Govt even know the situation if my company are paying me over here in America ?

Is this offer a big no no on my companies part ?

You would think that a huge multi national company would know what they are talking about but to be honest, I think they don't have a clue.

Thanks again for any opinions you have on this issue.

I want to do the right thing here and don't want to get burned....

You can stay on the US payroll, but they should still operate PAYE if they have a permanent establishment in the UK, under the UK PAYE definition of PE, not the US one or the treaty one.  They should take professional advice before going down this road - it is they who are liable for the PAYE (and the penalties and fines for not withholding), not you.  I recommend they take this advice from a qualified UK firm specializing in multi-national tax issues, like the Fry Group www.thefrygroup.co.uk.

If they have to do PAYE, they can do a modified PAYE to take into account various deductions.  If your secondment is for two years or less, you get a massive number of tax adjustments, which will be reflected on your modified PAYE.  The tax advisor can provide all this information to your employer.  Further, your US tax withholdings can be reduced by filing Form 673 with your employer.  http://www.irs.gov/pub/irs-pdf/f673.pdf

If, after taking the professional advice, it is determined that there is no PAYE requirement, then just file the 673 and pay your UK tax on a self assessment form.

Your employer should also pay for a US/UK tax preparation as it's confusing in the year of your move.