Hello, I'm writing to check I've understood correctly the many excellent posts on this topic already, and add one new wrinkle to see if I'm missing anything. First though I have to thank the many writers who have already contributed great ideas and suggestions on this board.
I'm a dual US/UK citizen in good tax standing, have always been very on top of my obligations to file/report/pay to both governments. FATCA, PFIC, FBAR - it's all good. (Well, really, they're a huge PITA, but I know what the rules are and I abide by them.)
My wrinkle is I am a UK company owner - I (and others) do work for a variety of clients, and then the company invoices the clients, and then the company pays me. Currently it pays me through a combination of a salary and a dividend.
My current question regards pensions. I'm still US-domiciled, my wife is UK-domiciled, and at the moment we don't know where we'll spend our golden years. My current thinking is to set up pension pots in both places, and to do the UK one first because it's easier.
I plan to have the company contribute £190K to a SIPP in 2014. I haven't contributed to a pension for the past 4 years, but I have an old UK pension from a previous employer, so I think that means I can carry the past years' allowance forward. I also think it's OK for an employer contribution to use a personal allowance. (These are all areas where I hope smarter people than me will chime in and say 'not so fast', if appropriate.)
I think this £190K will count as an expense for the company in 2014 - company profits will be about £250K - reducing the corporation tax the company pays.
I think the £190K will not be taxed as income in the UK in 2014/15. I'll be able to withdraw in when I'm 55, 25% of it tax free and the rest will count as ordinary income on withdrawal.
From a US perspective: I think because more than 50% of the contributions are coming from an employer, the IRS will view this SIPP as a foreign pension. This means it can hold PFICs and does not need the annual 3520 reporting needed if it was considered a foreign grantor trust.
The £190K contribution in 2014, however, will be seen to be foreign earned income by the IRS. (?). I could apply the FEIE to take a bit off it, and then use excess FTCs to hopefully bring my 2014 tax liability down to zero and create basis. One thing I am not sure about is whether I can also invoke the $50K tax-free contribution allowed if this was a US-qualified plan (eg an IRA).
Is there anything I'm missing?
Next year I will tackle whether and how a UK-based company can contribute to a US IRA - but, one thing at a time. (I think the US is OK with this, but the UK is not going to give me UK personal income tax relief on the contributions, making it less attractive.)
Thanks in advance for any insights.
