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Topic: Taxation on remittance basis for partner  (Read 1826 times)

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Taxation on remittance basis for partner
« on: November 16, 2023, 12:41:58 PM »
Hi,
My partner arrived from the US (she is a citizen) in March 2021, and her income is a US teachers pension. The majority of this income does not enter the UK and stays in US back accounts.
As tax in complex she hired a UK based tax accountancy to help who are meant to be experienced in UK/US tax issues.
Then have produced a draft tax return entirely based on the arising basis, just taking off her personal allowance, so saying she is due to pay a lot of tax. This would also apply to the previous year.
As I think she would qualify as non-domicile I dont see why she cant use taxation on a remittance basis, and I think pay little or no UK tax.
The firm seem too busy to answer any questions and its getting frustrating - we are even considering finding a new company - though I am ure we would be charged by the first.
I was wondering if anyone had experience in this area?
Thanks in advance.


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Re: Taxation on remittance basis for partner
« Reply #1 on: November 16, 2023, 01:47:42 PM »
The first thing I would do is Google Statuatory Residence Test and follow the instructions to see if she might definitely be considered a non-dom.

Having no income in the UK does not necessarily mean one is a non-dom.

https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3
Dual USC/UKC living in the UK since May 2016


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Re: Taxation on remittance basis for partner
« Reply #2 on: November 17, 2023, 04:29:49 PM »
Thanks for the link, there is some useful info there.
There has been some progress and the account as got back in touch. It seems that as it is a US teachers pension, it might not be subject to UK tax.


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Re: Taxation on remittance basis for partner
« Reply #3 on: November 17, 2023, 06:03:44 PM »
Thanks for the link, there is some useful info there.
There has been some progress and the account as got back in touch. It seems that as it is a US teachers pension, it might not be subject to UK tax.

According to the US-UK Double Tax Treaty some government pensions are only taxable in the USA. That certainly applies to federal pensions, not sure about State pensions. FYI my SS is only taxable in the UK as per the treaty, and my UK OAP is also only taxable in the UK

See section 17 on pensions

https://www.gov.uk/government/publications/usa-tax-treaties

« Last Edit: November 17, 2023, 06:05:54 PM by durhamlad »
Dual USC/UKC living in the UK since May 2016


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Re: Taxation on remittance basis for partner
« Reply #4 on: November 18, 2023, 10:03:11 AM »
A few observations (I am both a Chartered Tax Adviser in the UK and an Enrolled Agent in the US).
1. The remittance basis rarely, very rarely saves any tax at all for a US citizen. Under Article 24 of the Treaty, the US gives credit for UK tax paid.
2. Separately, you are relying on Article 19(2). Any such claim would naturally only be possible if made within a UK self-assessment tax return. This would only be possible if the individual was not a British citizen - and - the pension is a government pension. Whilst there is a strong argument that this a reasonable position, HMRC say here https://www.gov.uk/hmrc-internal-manuals/international-manual/intm343030 this: "The UK takes a restrictive view of what employments properly fall within Article 19.Generally, relief from UK tax will not be available where individuals are directly employed (whatever their job) in central, regional or local government service. Therefore, civil servants directly employed in central government, those who are directly employed in local or regional government, and members of the armed forces are clearly within the scope of the Article. By contrast, employment in nationalised industries is outside the Article. That is because the services (the work done) was not rendered to the ”State” as such. Those employed in privatised concerns are clearly outside the Article.

In between these extremes it may be much less clear how the wording applies. There may be a blurring of distinctions between public and private sector where employment is with an agency, board or other statutory body, especially where organisations have been privatised or decentralised. Also, structural reorganisations may make it hard to determine which entity is making a payment."
« Last Edit: November 18, 2023, 10:08:14 AM by guya »


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Re: Taxation on remittance basis for partner
« Reply #5 on: November 18, 2023, 10:09:40 AM »
According to the US-UK Double Tax Treaty some government pensions are only taxable in the USA. That certainly applies to federal pensions, not sure about State pensions. FYI my SS is only taxable in the UK as per the treaty, and my UK OAP is also only taxable in the UK

See section 17 on pensions

https://www.gov.uk/government/publications/usa-tax-treaties


It may help to clarify that I am not aware of any treaty exemption from US tax for the UK State pension.


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Re: Taxation on remittance basis for partner
« Reply #6 on: November 23, 2023, 09:26:42 AM »
Just to clarify, my partner is a US citizen, still on a 2.5 year visa. Her only income is a NY State teacher's pension. It is not taxable in the US. She does pay US Federal tax.
Sorry for the late response but the email went into the junk!


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Re: Taxation on remittance basis for partner
« Reply #7 on: November 24, 2023, 12:18:08 PM »
According to the US-UK Double Tax Treaty some government pensions are only taxable in the USA. That certainly applies to federal pensions, not sure about State pensions. FYI my SS is only taxable in the UK as per the treaty, and my UK OAP is also only taxable in the UK

See section 17 on pensions

https://www.gov.uk/government/publications/usa-tax-treaties [nofollow]

Thanks, I have not seen the agreement before. Section 17 makes it clear that if a pension is exempt in one State, it will also be exempt in the other.


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