Non-domiciled UK citizen?

I left the UK several decades ago and I have never paid taxes here. My husband was seconded here with his company in 2011. During these years I haven't worked in the U.K., and the thought of filing a tax return here has never even crossed my mind. I have personal investment income in the US of about $20,000/year and we file our returns in the U.S. as a married couple filing jointly.
Now I am considering using my US investments to buy a house here. We ran this by our accountant who asked whether or not I was UK domiciled. My initial reaction was to say of course I'm not because I left the U.K. nearly 40 years ago with the intention of never returning, and maintained no financial ties to the U.K. But now I'm worried I might be missing something, and whether I should have been submitting a self-assessment each of the past 6 years that we have been here.
Any thoughts?

I'm definitely out of my depth here, but your question will no doubt be answered by someone with specific knowledge. In the interim, here's some reading for you:

http://tools.hmrc.gov.uk/rift/screen/SRT+-+Combined/en-GB/summary?user=guest

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/528018/RDR1-residence-domicile-remittance.pdf

https://www.gov.uk/tax-foreign-income/non-domiciled-residents

If you were here for more than 183 days, then you were likely resident for tax purposes. You may or may not have been domiciled as well. Then there's the question of whether any income was 'remitted' to the UK. You could call HMRC, but you may or may not actually get to someone who could provide the correct answer.

It certainly can be a difficult one to figure out, I've been through that flowchart many times myself.

Have you used the NHS while living here since 2011 because I think non-doms don't have access to free healthcare from the NHS.  And if you are considered domiciled in the USA do you pay for health insurance there, or the mandatory tax for not having health insurance (under the ACA all residents in the USA must have health insurance).

http://www.surreyandsussex.nhs.uk/wp-content/uploads/2013/05/Entitlement-to-NHS-Hospital-Treatment-for-Non-Resident-UK-Citizens.pdf

If you are domiciled outside of the United Kingdom; in which State are you domiciled? what is your connection with that State? Do you expect to return there? Do you vote there? Do you have investments or property there? At this stage to claim the remittance basis would cost you an additional £30,000 each UK tax year; so is unlikely to be efficient, especially if you are going to remit the funds to the UK.

I'd suggest filing in the UK on the arising basis back to when you moved to the UK in 2011. You are unlikely to owe much tax; but should you do so you have 10 years to amend the US returns to claim foreign tax credits. 

Are your US investments structured with UK tax in mind?

The following comments may be of assistance.

There are two main possibilities here-
•   Angeline’s domicile of origin in the UK revived when she returned to the UK. If so the remittance basis would not have applied to her. She should have self-assessed here investment income if she had a UK tax liability. She would have been entitled to a UK personal allowance, and the rules on foreign dividends might have assisted. So it is possible that there would not have been tax due.
•   If Angeline did not become UK domiciled, the remittance basis would have been available. However, the remittance basis needs to be claimed -subject to de minimis amounts; the remittance basis depends on income and gains not having been transferred to the UK; and as noted above, there may not have been any UK liability in any event.

Going forward, Angeline should consider the rules from 6 April 2017 for what be termed returning domiciles.

Thank you for all the extremely helpful replies.
Yes, I am domiciled in a US state
Yes, I have voted there
Yes, I do own property there
Yes, I do intend to return there
Yes, I have international health insurance that covers me both in the US and the U.K.
Also, based on the flow chart and information in the links posted by Vadio, it seems quite clear to me that I am domiciled in the US.
So I feel there can be little question that I am non-domiciled here.
Nevertheless, based on my reading of the documents linked in Vadio's post, it seems equally clear that I should have filed a self-assessment, and may or may not owe taxes here. Any idea what the penalties will be for this oversight?

Yes, we need a little family history. What were her parents' nationality, where was she born, where did she grow up. Assuming the domicile of origin was UK and even if she changed domicile by living overseas permanently and starting a family, returning to the UK to live with that family indefinitely probably means her domicile is still UK.

Are your US investments structured with UK tax in mind?

No. They are Vanguard mutual funds. I plan to sell them all to purchase the property here. Should I convert to (HMRC-reporting) Vanguard ETFs before selling, or does it make no difference since I'm cashing out? Should I sell before or after April 6?
I understand that once I buy a house here from April 6 I will automatically become deemed domiciled in the UK. How does that affect my situation in the US where I have my homestead? I do not plan to sell in the US but to maintain both homes.

Thank you for all the extremely helpful replies.
Yes, I am domiciled in a US state
Yes, I have voted there
Yes, I do own property there
Yes, I do intend to return there
Yes, I have international health insurance that covers me both in the US and the U.K.
Also, based on the flow chart and information in the links posted by Vadio, it seems quite clear to me that I am domiciled in the US.
So I feel there can be little question that I am non-domiciled here.
Nevertheless, based on my reading of the documents linked in Vadio's post, it seems equally clear that I should have filed a self-assessment, and may or may not owe taxes here. Any idea what the penalties will be for this oversight?

even if you are still domiciled in the US you are UK resident. Did you claim the remittance basis for your foreign gains? If not you'll be liable to UK tax on foreign gains over $2k. You have also been in the UK for almost 7 years and you'll soon have to pay $30k/year to claim the remittance basis.

If your funds are in HMRC non-reporting funds you won't get any CGT allowances and you'll pay tax on the gains at your marginal income tax rate.

PS edit.
Vanguard mutual funds are not on the list of HMRC reporting funds......the EFTs are.

Has your husband's company provided tax assistance. You would have been better advised to re-structure before becoming UK resident. You will need to file since 2011 in the UK and pay any UK tax due. The US will give you a credit.

If you are realising gains on US investments, the UK tax will be identical pre/post 6 April 2017. You will want to pay it to HMRC by 31 December 2017 so that you have a foreign tax credit for 2017.

Thank you for all the information provided so quickly. This forum is invaluable.

If your funds are in HMRC non-reporting funds you won't get any CGT allowances and you'll pay tax on the gains at your marginal income tax rate.

PS edit.
Vanguard mutual funds are not on the list of HMRC reporting funds......the EFTs are.

So before I sell and realize capital gains, should I convert to the corresponding ETFs at Vanguard? Will all my gains accumulated over the entire holding period of 10+ years be taxed favourably by converting to ETFs at this point?
My only income is my investment income so I should be in a low bracket.

If you can convert them to their etf equivalents that is what I would do. In fact that is exactly what I did before moving back. Note that balanced funds tend not to have an etf equivalent.

If you can convert them to their etf equivalents that is what I would do. In fact that is exactly what I did before moving back. Note that balanced funds tend not to have an etf equivalent.

Yes and if they are vanguard funds held at vanguard, V will do the exchange to etf without cost or us tax consequence, rolling over the cost basis into the ETF. You have to call them to ask them to do the exchange - no online option. But it is fast and pain free


From the website:

Can I convert my conventional Vanguard mutual fund shares to Vanguard ETF Shares?
Yes. Most funds that offer ETF Shares will allow you to convert from conventional shares of the same fund to ETF Shares. (Four of our bond ETFs—Total Bond Market, Short-Term Bond, Intermediate-Term Bond, and Long-Term Bond—don't allow for conversions.)
Conversions are allowed from both Investor and Admiral Shares and are tax-free if you own your mutual fund and ETF Shares through Vanguard.
Keep in mind that you can't convert ETF Shares back to conventional shares. If you decide in the future to sell your Vanguard ETF Shares and repurchase conventional shares, that transaction could be taxable.
If you have a brokerage account at Vanguard, there's no charge to convert conventional shares to ETF Shares. If you have questions, call us at 866-499-8473.
If you own your Vanguard mutual fund shares through another broker, keep in mind that some brokers may not be able to convert fractional shares, which could result in a modest taxable gain for you. Other brokers may also charge a fee for a conversion. Contact your broker for more information.
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So before I sell and realize capital gains, should I convert to the corresponding ETFs at Vanguard? Will all my gains accumulated over the entire holding period of 10+ years be taxed favourably by converting to ETFs at this point?
My only income is my investment income so I should be in a low bracket.

That would not be a taxable event according to Vanguard and the IRS because the mutual fund and it's equivalent ETF are invested identically.....it's just changing a label. You will have to have a US brokerage account to do this.

Now I wonder what HMRC's stance is on this as you are going from a non-reporting fund to a reporting one.....they might see it differently from the IRS.