Split tax year & domicile question

Actually not far from my brother in Stockton. I was back a couple of years ago to bury my Mum and gave a lot of stuff to the Teesside Hospice shop just off Westgate and made multiple trips to the recycling center. She's buried with my Dad at St. Mary's with a fantastic view of Rosberry Topping and the rest of the Cleveland Hills.


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When we stayed in Guisborough for 6 months in 2011 we bought a lot of stuff from the charity shops in Guisborough and then donated most of it back before we left.  Cheap rental, and quality stuff, in fact the 2 armchairs we bought were really nice and given away to friends who had loaned us a washing machine.

In 2011 we had no intention of moving back and I was very careful to track days in the country for that year and the previous 3, following the residence test rules in effect at that time. The 6 months was split over 2 UK tax years plus we took vacations during that time in Ireland and Madeira to keep down the averages.

I don't think you will have to do the FATCA when you are here in the UK. I still haven't gotten around to finalizing TurboTax, but I believe since I am now a resident here the limits were (if I remember correctly) $400K at the end of the year, or over $600K at any time. We were over $400K, but not at the end of the year......and were never over $600K.

I don't think you will have to do the FATCA when you are here in the UK. I still haven't gotten around to finalizing TurboTax, but I believe since I am now a resident here the limits were (if I remember correctly) $400K at the end of the year, or over $600K at any time. We were over $400K, but not at the end of the year......and were never over $600K.

The only thing for FATCA for us is the requirement to have been out of the country for 330 days, which we will never be.

https://www.irs.gov/Businesses/Corporations/Do-I-need-to-file-Form-8938-Statement-of-Specified-Foreign-Financial-Assets
Taxpayers living abroad.  You are a taxpayer living abroad if:

You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or
You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.

Back to one of my original questions, which I probably know the answer to but did not get confirmation.

To argue to the IRS that my centre of vital interests is the UK for the years when I am otherwise tax resident in both the US and UK I should include form 8833 citing article 4 of the DTA. (where centre of vital interests is mentioned)

The only thing for FATCA for us is the requirement to have been out of the country for 330 days, which we will never be.

https://www.irs.gov/Businesses/Corporations/Do-I-need-to-file-Form-8938-Statement-of-Specified-Foreign-Financial-Assets
Taxpayers living abroad.  You are a taxpayer living abroad if:

Guess I am back to being confused then........I have not been in the UK for 330 or more days of 2015 (in the UK about 260 days of 2015)....which if I read the link you gave would indicate I need to do a FATCA.....I think....TurboTax indicated I did not need to do FATCA.

Back to one of my original questions, which I probably know the answer to but did not get confirmation.

To argue to the IRS that my centre of vital interests is the UK for the years when I am otherwise tax resident in both the US and UK I should include form 8833 citing article 4 of the DTA. (where centre of vital interests is mentioned)

Let's go through the 4 criteria one by one:

Permanent home
It says:
"A permanent home is any form of accommodation which is continuously available to you for your personal use. It does not necessarily have to be owned by you. The test will be inconclusive if you have a permanent home in both countries."
For 2016, you will be renting a home in the UK, but for more than 183 days, you will have rented a home in the US. For 2017, more time is spent in the UK, but until you purchase a home, you'll still be renting, and renting for long periods in the US also.

If the UK rental is not occupied by anyone else while you are away, but the US rental is, then you might claim the UK home is your 'permanent' home. Questions: will the UK home be furnished by you? Will it be an address for accounts from both the US and UK? Will you have a rental contract for 1 year or more? Are you responsible for the utilities?

This may be a close call unless you do everything possible to establish the UK (rented) home as your 'permanent residence. Once you buy, it may become easier.

Centre of vital interests
"You will be a resident of the state with which your ‘personal and economic
relations’ are closer."
Start with personal: where are your parents (dead)? Where are your children? From what you've indicated, your personal ties are in Texas (children).

Economic: You'll likely have a bank account in both countries, and possibly a savings account in the UK. You have a (small) UK company pension and the UK State Pension. But, you also have a (larger) pension in the US and US Social Security. All your investments are in the US (?). Will the 'profits' from the investments be kept in the US, or will they be forwarded to the UK? The address you use for your investments is a US address. Are the UK pensions paid into a UK bank account or a US bank account. Where do you own a car (aside from the 1st month renting in the UK)? Where is your driving license? Where is your furniture and personal belongings? Are they all in the UK or in storage in the US?

Habitual abode
"The number of visits as well as the duration of the visits are taken into account and this test is applied over a sufficient period as is necessary depending on the facts of each case."
Right now, your habitual abode is the US. Unless you establish 'sufficient periods' in the UK, and do not maintain frequent or longer duration visits to the US, it would eventually change to the UK. If you yearly meet the substantial presence test in the US, it would be hard to prove your habitual abode is in the UK.

Nationality
Toss up, you're both.

This is a hard (idiots - me) look at the rules. You'll need to evaluate all 4 criteria and do what you are able to make whichever country you want to be your residence for treaty purposes, obvious. The authorities may be kinder. You have strong ties to both countries, but right now it's very slanted towards the US. You'll have to make it obvious you intend to make the UK your permanent home, but long visits back to the US may make that difficult.

I don't think a 8833 would make much difference to the IRS.

Toss up, you're both.

This is a hard (idiots - me) look at the rules. You'll need to evaluate all 4 criteria and do what you are able to make whichever country you want to be your residence for treaty purposes, obvious. The authorities may be kinder. You have strong ties to both countries, but right now it's very slanted towards the US. You'll have to make it obvious you intend to make the UK your permanent home, but long visits back to the US may make that difficult.

I don't think a 8833 would make much difference to the IRS.

If not an 8833 then what documents do I provide to the IRS or HMRC to demonstrate where my centre of vital interests belong.  In 2016, that will be 6 months each, own a car in both countries, rent a property in both countries (a much bigger place in the UK, 3 bed with garden). Two strong independent adult children in their 30's living in the USA (one of them lives 2,000 miles away), but several siblings we are close to, 2 of which have serious health problems, in the UK that we want to be close to.

2017 we'll own property in the UK and have started 9 months/year living there so much easier to choose UK and prove that we've chosen UK. 

It looks like for the first year or 2 it will be easier (and lower taxes) to claim the US as primary tax authority, after that then the UK, particularly if we decide to lower expenses and drop the US apartment (renting somewhere different each winter).

The UK 2016/17 tax year will actually be 8 months in the UK so if I've chosen the US for my centre of vital interests when I file US taxes for 2016 what documentation do I provide to HMRC so they don't tax my US income for the 8 months we were living in the UK?

Guess I am back to being confused then........I have not been in the UK for 330 or more days of 2015 (in the UK about 260 days of 2015)....which if I read the link you gave would indicate I need to do a FATCA.....I think....TurboTax indicated I did not need to do FATCA.

If TurboTax has all the info on dates then you could follow its guidance.  I've been through the FACTA filing once and although it was painful because of the usual issues of the form not accepting UK format post codes  there is no other tax to pay and you would certainly have a clear conscience and not worry about an audit and possible fine.

The time I filed 8938 was the first year FACTA was implemented and the limits must have been lower because I've never had foreign accounts valued at $100k. It was TurboTax I was using and it guided me through the form(s), and I'm sure it must be better now, e.g. allowing foreign addresses of banks to have non-US format "zipcodes".

If not an 8833 then what documents do I provide to the IRS or HMRC to demonstrate where my centre of vital interests belong.

You may be OK, but my honest opinion would be to talk to a pro. This isn't to find someone to do the tax returns, but to obtain an opinion about any problems you may have given your circumstances. Perhaps a 1 or 2 hour sit down to talk through alternatives. I'd rule out a pro in the US unless you know for sure they're competent in US/UK tax. Obvious suspects would be those in the UK.

Start with the UK. I take it you won't arrive until after 06 April 2016. That would put you into the 2016/17 tax year. The drop dead last date for filing a 16/17 UK return would be 31 January 2018, so you have plenty time to work out the UK side (and to have sufficient days in the UK by then).

For the US, the 2016 return is 15 (April(?), June(?), October(?)) 2017, all depending if the US recognises your residence abroad on 15 April or if you were to file for an extension. Still, there's time to obtain an opinion and act on it.

Both the IRS and HMRC will be happy to receive a return, but as you've obviously figured out, the trick will be to have one recognise a tax residence in the other country in order to have treaty protection. They'll both be happy to receive a full amount of tax due, but you won't be happy with that scenario, so your goal is to establish a residence that will hold up to questioning. If you're living in the UK for 8 months out of the tax year, they'll want tax for that year and no treaty would prevent it, only possibly the offset of credits IF they accept them (back to the 4 point test).

As an American living abroad, I know I'm extremely cynical about US intentions, but the one objective is to make sure the IRS doesn't view your UK residence as a 2nd, or vacation home. That would apply whether you're renting or an owner. Think about it, their view might be you're claiming permanent residence abroad simply to avoid paying US tax via a treaty with the UK. Yes, the UK has higher rates, but that's not been a problem to prevent them jumping to conclusions up till now. Welcome to the world of the US citizen abroad automatically guilty of avoiding paying their fair share of US tax. Sorry to be a bore on this but that's the direction things are going at the present.

Filing an 8833 with the 'centre of vital interests' may achieve no more than a large red flag on your return. Right now, I'm not sure the computers are linked that would record your entry/exit to the US for the IRS. Therefore, how you file (as if you have moved permanently, or not) will start with your return. Here's where professional advice would help a great deal.

You know you're doing nothing wrong, simply want the joy of being able to be in both countries, and you have the citizenship entitlement to do that. There are others on BritExpats we both know of who are doing the same thing, but as I understand it, after setting up a home in the UK, he is carefully limiting his time in the US to 2, two month visits per year (or 122 days per year) so he falls below the substantial presence test. It sounds as though eventually you'll be doing the same. Unfortunately, tax authorities have suspicious minds.   

Thanks OAP, as always your thoughtful replies are excellent. I will certainly take your advice and wait until after we arrive in the UK ( May 8 ) and then start looking for a tax pro to get advice. There are plenty of sites I've bookmarked that have been given here.