Author Topic: UK tax on terminal vacation pay?  (Read 1230 times)

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Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #15 on: January 18, 2018, 09:18:00 AM »
Heard from HMRC on the pre-tax deductions taken from the USA paycheck for vacation pay disbursed to me while I was in my first month in the UK:  if it was pre-tax in the USA, they consider it pre-tax (or excluded from tax) in the UK. So, I go with my USA taxable income as "foreign income" for HMRC for that month, and yes, they will allow a tax credit for tax paid for that month only on my 2017/18 taxes.

Now, another question:  I do not yet draw US Social Security (I'm holding off so that I receive higher checks each month in a year or two).  When I do draw it, I know the UK will have first dibbs on taxing it, and it won't be taxable in the USA at all because of the treaty. However, if it ~was~ taxable in the USA (if I was living there), about 25% of the social security payment would not be taxed.  I remember reading something about if a benefit payment is non-taxed in the country of origin it should be treated the same in the country of residence (but it's been a while since I read that and can't find it again). Anyone know anything about that?

Offline vadio

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Re: UK tax on terminal vacation pay?
« Reply #16 on: January 18, 2018, 10:14:10 AM »
If you are taxed on the arising basis, 100% of your SS is reported and subject to tax in the UK per the treaty. We formerly got a 10% break, but that ended with the 2016/2017 tax year.

What your remember is in Article 17.1.b. However, SS is covered by a different part - Article 17.3..
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Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #17 on: January 18, 2018, 12:05:51 PM »
Ah, ok, thanks!  That explains why I couldn't find that language when I went back into the treaty!

Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #18 on: February 21, 2018, 12:48:17 AM »
Yeah, and that's also why it would have been good to have the pension considered a government pension. The IRS would have taxed it only, at a rate slightly less than the UK. And the social security checks, when that time comes, would have only been taxed by the UK. Since they wouldn't have added up to a heck of a lot more than the personal allowance, tax would have been minimal in the UK. The combination of Pension and SS both in the UK will be a lot more.

Then again, do I want Rump getting my tax dollars at all?  ::)

Offline durhamlad

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Re: UK tax on terminal vacation pay?
« Reply #19 on: February 21, 2018, 08:08:32 AM »
Then again, do I want Rump getting my tax dollars at all?  ::)
That’s exactly how I feel. :)
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Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #20 on: February 21, 2018, 02:20:19 PM »
And I had more communication with HMRC. They are now saying that my terminal vacation pay was associated with employment completed prior to becoming a UK resident, so it should NOT be included on my tax self-assessment.

 ???

Offline durhamlad

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Re: UK tax on terminal vacation pay?
« Reply #21 on: February 21, 2018, 02:39:31 PM »
And I had more communication with HMRC. They are now saying that my terminal vacation pay was associated with employment completed prior to becoming a UK resident, so it should NOT be included on my tax self-assessment.

 ???

Wow.

Congratulations.
Adventure before dementia

Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #22 on: February 21, 2018, 02:54:26 PM »
Yeah, so now I have a letter from them saying it's taxable, and a chat with them (more recent) saying it's not.

I assume it will be safe to go with the last advice. I hope.

Offline theOAP

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Re: UK tax on terminal vacation pay?
« Reply #23 on: February 21, 2018, 03:26:46 PM »
And I had more communication with HMRC. They are now saying that my terminal vacation pay was associated with employment completed prior to becoming a UK resident, so it should NOT be included on my tax self-assessment.
So,...no surprises there, then. (See 2nd paragraph reply #4 and 1st paragraph reply #7.)

I'm sorry, I really couldn't help that! I'm just glad HMRC has now seen the light. This may help a great deal with your apportionment, and UK taxes attributable to the resourced basket, on the 2017 return and 2019 1040X (and yes, I've seen your latest posts).

Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #24 on: February 21, 2018, 03:45:05 PM »
Yeah, it will, as I don't expect to have earned income so I wouldn't be able to use any overages for the employment basket going back. :)

You know, Math and I (and things related to math) have had a hate-hate relationship for years. I was kept after school most days for many years for private tutoring to catch up in maths. And really, it never took. The logic is obviously there, but for me it's not clear cut. Once I have a "do A, then do B, then do C" I can handle almost anything. Even the math calculations. But with the IRS it's just not that clear cut and they are not at all user-friendly. I've got three college degrees and told I have a very high IQ, and it is incredibly frustrating to not be able to sit down and sort this out on my own. I feel like dementia is creeping up. Time for a cup of tea and a sniffle. Thank you for listening and posting.  :)
« Last Edit: February 21, 2018, 03:59:21 PM by Nan D. »

Offline theOAP

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Re: UK tax on terminal vacation pay?
« Reply #25 on: February 21, 2018, 04:37:08 PM »
You know, Math and I (and things related to math) have had a hate-hate relationship for years. I was kept after school most days for many years for private tutoring to catch up in maths. And really, it never took. The logic is obviously there, but for me it's not clear cut. Once I have a "do A, then do B, then do C" I can handle almost anything. Even the math calculations. But with the IRS it's just not that clear cut and they are not at all user-friendly. I've got three college degrees and told I have a very high IQ, and it is incredibly frustrating to not be able to sit down and sort this out on my own. I feel like dementia is creeping up. Time for a cup of tea and a sniffle. Thank you for listening and posting.  :)
I'll tell you a short story.

For 20+ years, I did my US taxes in a weekend. There was only the pencil and paper method available, and one received a thick book each year of US tax forms and instructions in the mail. I only had employment pay and interest to declare. Then I retired. Frustration like you wouldn't believe (no UK Yankee, IRS tax information site [since abandoned] and only a phone number for the US along with a phone number for the US Embassy [they seldom answered], and TurboTax had no idea what a US person was doing residing outside the US with foreign pay). Since then we've had all sorts of additional reporting responsibilities. I used to hate that weekend of US tax returns. Now I hate every day where US tax returns are involved.

It's not the math. Undecipherable tax legislation written for persons living and working in the US does not (and can not) easily transpose when those people live abroad.

Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #26 on: February 21, 2018, 05:04:50 PM »
Yeah. I have done my own taxes for years.  I just got off the phone with the IRS and for the second time they will not offer any advice at all. They simply refer to the publication.

I think I'm going to try HMRC with another question - at least I can "speak" to a sentient being there!

Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #27 on: February 21, 2018, 05:38:39 PM »
Ok.  Just to nuke all previous conversations, as they are hopelessly tangled up in my head now.  Please excuse me having to do this again.... Starting as if I'd never posted anything:

1) I have US pension (only), am a US citizen, and live in the UK since May 2017.
2) The IRS has withheld taxes from said pension.
3) There was no mechanism for withholding for HMRC, and I still don't know my HMRC tax bill for sure for HMRC 2017/18. Thus, I have not paid HMRC anything at all - yet. I am doing nothing until I know what I owe HMRC.
4) The IRS will allow me to re-source (form 8833) my pension to the UK per Article 17 of the US/UK tax treaty, and then claim foreign tax credit for it (form 1116).

Question - Can I file the 8833 and 1116 to claim back tax from the IRS on the 2017 portion of the 2017/18 UK tax year when I file my IRS tax forms for 2017?


Offline guya

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Re: UK tax on terminal vacation pay?
« Reply #28 on: February 21, 2018, 08:14:55 PM »
So,...no surprises there, then. (See 2nd paragraph reply #4 and 1st paragraph reply #7.)

I'm sorry, I really couldn't help that! I'm just glad HMRC has now seen the light. This may help a great deal with your apportionment, and UK taxes attributable to the resourced basket, on the 2017 return and 2019 1040X (and yes, I've seen your latest posts).
Glad to hear you agree with the statute.

Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #29 on: February 23, 2018, 11:34:06 PM »
Glad to hear you agree with the statute.

Just because... if you happen to know the particular statute, for my reference?