Dual resident and taxation

We've spent a lot time in the UK this last 4 years and have been diligent in keeping below the limits of residency for tax purposes.  We are now considering splitting our time fairly equally between the US and UK, summers in the UK, winters in the US.

We've been resident in the US since '87 and our 2 children grew up in the USA and work there.  All 4 of us are Naturalized USC's  The vast majority of our income is in the US. (we are retired and have pensions plus IRA's etc).  We intend to return to the US in the long run, so we consider ourselves domiciled in the USA.

If we go ahead with this plan will we be liable for UK taxes?  The way I read the UK/US Double Taxation Agreement it looks like we won't, but I'm far from sure.

At present I receive a small UK private pension which I declare and pay tax on my US taxes (no UK taxes are witheld as I filed the appropriate forms with HMRC when I started drawing it).

Very good question.

You've asked this question at a key time; the Finance Bill 2013 contains new legislation regarding when and when isn't a person deemed to owe UK tax. As I understand it, the Bill was given Royal Assent in the last few weeks.

If you haven't stumbled across this, here is some reading on the latest 'draft' information before the Bill was given Royal Assent:

http://www.hmrc.gov.uk/international/residence.htm#1

Also, on the SRT (statutory Residence Test):

http://www.hmrc.gov.uk/international/rdr3.pdf

Wow, I hadn't come across this, so great information.

Thanks for such a quick response.  I'll have a good read over those links.

As you'll discover, the SRT 'automatic' rules stress 'income earned from working', but also seem to concern CGT. Since both you and your wife are retired, I'm not sure how 'retirement income' applies; is it by SRT, or is it just the 91 or 183 day rules applied with the treaty rules. Do the 'ties' of SRT come into play?

I'm still not sure if the Bill has obtained Royal Assent or not (making it law). I'm very uncertain as to how 'repetitive yearly visits' of over 91 days are viewed and birth in the UK (UK domicile) but strong 'domicile' ties to the US (you can only have one domicile?).

I've been more interested in Clause 219 of the Bill, so haven't paid that much attention to the above aspects.

 

As you'll discover, the SRT 'automatic' rules stress 'income earned from working', but also seem to concern CGT. Since both you and your wife are retired, I'm not sure how 'retirement income' applies; is it by SRT, or is it just the 91 or 183 day rules applied with the treaty rules. Do the 'ties' of SRT come into play?

I'm still not sure if the Bill has obtained Royal Assent or not (making it law). I'm very uncertain as to how 'repetitive yearly visits' of over 91 days are viewed and birth in the UK (UK domicile) but strong 'domicile' ties to the US (you can only have one domicile?).

I've been more interested in Clause 219 of the Bill, so haven't paid that much attention to the above aspects.

 

So far I've kept a detailed record of comings and going and made sure we have never been in the UK more than 183 days in any tax year and kept the rolling 4 year average below 90 days.

I'll have a read through the links you sent tomorrow.

The bill received Royal Assent on July 17 and is now law (well, an Act of Parliament, to be specific)

The bill received Royal Assent on July 17 and is now law (well, an Act of Parliament, to be specific)

Thanks, nice to know it is now in force.

Phew, I've read through the documents and believe that it does not change my circumstances in that I will be resident in both the US and UK if I split my time living equally in both countries.  Also, the new documents link to the same document to determine in which country I woud be domiciled and following the flowcharts I have sufficient reasons to consider my self domiciled in the USA.

Since it comes down to the fact that there is a DTA in force between the USA and UK, the way I read it is that since we will be resident in both countries and domiciled in the USA it looks like we won't be liable for UK taxes.

If you are dual resident have you looked at Article 4 of the Treaty to determine where you are treaty resident should you wish to elect that?

Incidentally for UK income tax purposes no-one is US domiciled; one needs to demonstrate domicile in a specific State.

If you are dual resident have you looked at Article 4 of the Treaty to determine where you are treaty resident should you wish to elect that?

Incidentally for UK income tax purposes no-one is US domiciled; one needs to demonstrate domicile in a specific State.

I have looked at article 4 of the treaty which is why I pose the question.  We are thinking of renting an apartment year round in the UK, using it about 6 months a year. We will maintain our permanent home in the USA, and have lived there some 26 years.  Both our adult children live in the US and virtually all our income (from pensions and withdrawals from retirement savings) is in the USA.  From the treaty it appears that we can claim that the US is our domicile as that is where our vital interests lie.

From article 4 of the treaty,

"4. Where by reason of the provisions of paragraph 1 of this Article, an individual is a resident of both Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);"

Article 4 has no relationship to domicile - only residence. If you arguing that you have a centre of vital interests in the US you would file a UK return each year asserting such claim. This is well covered in HMRCs notes to the Foreign pages.

Does such a claim save you any tax?

Article 4 has no relationship to domicile - only residence. If you arguing that you have a centre of vital interests in the US you would file a UK return each year asserting such claim. This is well covered in HMRCs notes to the Foreign pages.

Does such a claim save you any tax?

This is my question.  I have a small UK pension, 2,200 GBP, that I currently pay US taxes on and in due course will receive another small private pension plus an OAP from my earlier UK employment.

If I become resident in both countries by renting a holiday apartment in the UK, staying there more than 90 days/year what taxes would I pay in each country.  I have no problem in filing a UK return each year but am unclear on which income streams will be taxed in each country as I'll be resident in both the US and UK. 

I just want to be perfectly legal in all this.