Taxation and Immigration issues
In this world of international travel there has been a substantial increase in partnerships and marriages of those from different countries. While on the face of it you would expect marriage alone to assist with such subjects as immigration and taxation we often see issues arising which on the face of it looked fairly straightforward but when you take a deeper look can often be highly complex and complicated.
We have a post on the Expat Forum entitled “Splitting time between US and UK” which covers a number of issues which many people will find of interest if they have married someone from a different country. In this particular instance the lady is originally from the UK and the gentleman originally from America and they are now married. The thread centres upon taxation issues but as you might expect when a couple are looking to split their time between the UK and the US the subject of immigration and permanent residency has reared its head.
Setting the scene
In this particular instance the couple were married in the UK and stayed there as man and wife for about 18 months before the husband got a job in America and the whole family moved over to the States. They now have a new born baby and appear to be having difficulty in balancing out their family time between the US and the UK with the UK side of the family in particular obviously looking to spend more time with the newborn baby.
The gentleman in question has a job with an international U.S. based company and is able to work literally from anywhere around the world via teleworking as his company offers a significant support network for those working from home. However, the main concern appears to be the potential tax implications if they decide to split their time 50/50 between the US and the UK.
For the record, both husband and wife have US residency and pay US taxes.
Taxation issues
US taxation
There are a number of comments on the post, many of which are very useful and very informative,
with the ultimate outcome that those resident in the US will forever be liable to pay taxes in that country. We have covered this situation on a number of occasions and while there may be a chance to offset taxation deemed to be earned “overseas” ultimately if you are resident in the US you need to file your taxes in that country.
At this moment in time the lady is on maternity leave so there are few issues regarding her taxation although this will change if she decides to go back to work when her maternity leave is over.
UK taxation
The UK tax year is slightly different from the US and on the surface anybody who spends more than 183 days a year in the UK in any one tax year is liable to UK taxation. However the situation is slightly complicated by the 91 day average rule which can catch foreign visitors to the UK who on average spend 91 days or more in the UK over a four-year period. The situation of UK tax rate has also been raised on the thread and the fact that in basic terms the rate of tax paid in the UK appears to be higher than that in the US, although tax rates can and do change on a regular basis.
There is also much mention of the double taxation relief available between the US and the UK which should ensure that nobody pays double taxation on any income no matter how much is deemed to be from the UK and how much is deemed to be from the US.
Immigration issues
Initially it looks as though the family would like to split their time 50/50 between the US and UK but this could potentially place the lady’s US residency in jeopardy. There is a suggestion that if regular patterns of travel to the UK develop over a long period of time the US authorities could withdraw her permanent residency in the US which could obviously have significant issues for family life and future travel.
There is a suggestion that after a specific time period, the third anniversary of the granting of permanent residency is mentioned, the former UK resident, who is now resident in the US, may well be able to have trouble free travel overseas without any potential immigration issues. However, as with taxation issues both in the UK and the US it is vital that you do your homework to see if any rules have changed because issues with immigration can be both long-lasting and potentially detrimental to your everyday life.
Possible solutions
One possible solution mentioned in the thread is that the mother and child go on their own for regular visits to the UK with the husband using up his annual US holiday allowance to travel as and when he can. This will ensure that there are relatively few, if any, taxation issues as the time spent out of the country will be minimal to say the least. Interestingly the subject of a dual residency is also mentioned by number of people and this could be the ultimate answer to any potential taxation or immigration problems in the future.
Again, the rules regarding dual residency also seem to change on a regular basis and is vital that you do your homework and ensure you know exactly what is required and what dual residency actually means to you.
Conclusion
This is a very interesting post which covers the subject of dual taxation and dual residency in significant detail. While there is a dual taxation agreement between the UK and US authorities there are still terms which need to be adhered to ensure you make the most of the agreement and pay the correct taxation.
The side issue of immigration is obviously a major concern to many people who move overseas even if they take residency in their new homeland. Travel issues need to be considered very carefully because regular visits back to your original “homeland” can potentially put your residency in your new homeland at risk.
The bottom line is that immigration and taxation issues around the world change on a regular basis and you need to take professional advice to ensure you’re making the correct moves and making the most of what is available to you.
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have had US green card (Residency)1 year in November. Will be retiring at end of year and collecting state and occupational pension.However wish to spend some time in us /uk and travelling. will be leaving property in uk as will not wish to sever links with friends relatives in uk. how much time will I need to be in each place and where do I pay tax on my pension.Travelling to us end december for 1-2 months initially to sort out place to live etc. will therefore need to file us tax form for january for 2008/9 I presume. As I will have paid Paye in Uk until retirement and have P60 and then P45 am I liable to pay tax in Us as well although I have not earned or intend to get employment in the us. Help!!!!!