[nhow]

I'm a non-dom UK resident (married to a UK citizen). I'm filing a self-assessment using the arising basis (used remittance basis last year). I reported my 2011 pension income in January but didn't have my US 2011 tax return at that point in order to report interest and dividend income. Now I'm thoroughly confused about which US tax return to use for this information. As the UK tax year is April to April, should I use my US 2010 return or wait until I have my completed 2011 return? It would be impossible to figure out which portions of these income sources arose before and after April, 2011.

I had a UK tax accountant who was really bad and I fired him as he really knew nothing about any of this and never answered my questions. I have a US tax accountant who files my US returns but he doesn't know anything about UK tax law. I'm already paying a lot for his services and can't afford to hire another one here. I'm a 70 year old pensioner with some additional income from dividends and interest but not enough to afford much more in the way of tax consultants.

Thanks for your help.

 

[Bevdeforges]

Where is your pension from? The US or UK?

In any event, for your US taxes, you are supposed to declare income received during the calendar year 2011 - whether you're reporting pension or interest and dividends. For UK taxes, you report what you received during the UK tax year (April to April).

Let's see if we can flag down someone with some experience in UK taxation to help with this.
Cheers,
Bev

 

[nhow]

clarification

Hi Bev,

All my income is from the US, i.e., pension and some dividends and interest (in a small in vivro trust where I'm the trustee and my daughter, a US resident is the beneficiary). I won't have the 2011 information until my US accountant completes my 2011 US return.

When I have both the 2010 and 2011 US returns, should I take a percentage of income and tax paid from each to report to HMRC? Only way I can see to do this. I don't have any vouchers from individual companies.

Thanks!!!

 

[Bevdeforges]

When I have both the 2010 and 2011 US returns, should I take a percentage of income and tax paid from each to report to HMRC? Only way I can see to do this. I don't have any vouchers from individual companies.

That certainly sounds like the most logical approach, though I'd base your UK declaration on the 2011 figure only.

In essence, you would back off the first quarter - Jan - Mar 2011 - and add back an estimate of what you expect for Jan - Mar 2012. You'd have to adjust the 2012 estimate based on how things seem to be trending. Is your pension adjusted annually for inflation, for example? Or does the trust income seem to follow the overall market?
Cheers,
Bev

 

[nhow]

Hi,

My pension isn't adjusted for inflation. Every few years they give a small rise on a base amount (not the full amount) so it's hardly increased in the 6 years I've drawn it.

Since I first posted this, I found a guidance from HMRC on how to report foreign trust income. Where I am using the arising method, it says I need to report the income in the year(s) it arose. The examples they gave showed using a percentage from two calendar years to conform to the UK tax year. So, if I'm reading it correctly, I need to take 9/12 of the income (and tax paid in the US) from my 2010 US return and 3/12 from my 2011 US return.

My worry now is that (although I already reported my pension to HRMC in January in order to meet the tax reporting deadline), I cannot report the trust income until I receive my US 2011 return from US accountant. I should have it soon but it's still after the UK deadline. This will always be the case. Not sure how to handle this so that I will not be liable for late fees every year.

 

[Bevdeforges]

Can you not use last year's trust income? Or give it a good faith estimate based on the last year you have the information for? If it somehow comes in wildly different, there should be some way to amend your filing. (Though I'm well aware that not every country does their taxes like the US does.)
Cheers,
Bev

 

[nhow]

probably not possible

Can you not use last year's trust income? Or give it a good faith estimate based on the last year you have the information for? If it somehow comes in wildly different, there should be some way to amend your filing. (Though I'm well aware that not every country does their taxes like the US does.)
Cheers,
Bev

I've read and reread the guidance. It very specifically says you need to report the actual amounts in the year they 'arose.' They give as an example, taking 3/4 from the earlier year and 1/4 from the later year. If they don't quibble, what I can do is request a time extension in advance for future years and let them know that it's so I can get accurate information. If they are hard core, then I'll have to be more creative....but I'm sure there are plenty of other US expats in the same (leaky) boat.