American Citizens Abroad
Town Hall Seminar
Daniel Hyde
daniel.hyde@westletondrake.ch
27 November 2013
Agenda
• US tax compliance issues
• UK compliance issues
• UK residency tests
Form 1040
Individual Income Tax Return
• You must file if your worldwide gross income exceeds:
– Single
– Married filing Jointly
– Married filing Separately
$9,750
$19,500
$3,800
• Thresholds increase if aged over 65.
• Don’t forget your children!
Myth
You are not exempt from filing because your income is excluded by the
foreign earned income exclusion. You need file a tax return to make a
claim to the exclusion
Form TD F 90-22.1 is now Form 114
“The FBAR”
• Report of all foreign bank and financial accounts including
maximum balances in the year.
• Required where aggregate maximum balance exceeds
$10,000
• No extensions allowed – due June 30.
• Since 1 July 2013, mandatory requirement to e-file.
– http://bsaefiling.fincen.treas.gov/Enroll_Individual.html
• Penalty for non-wilful non-filing $10,000 per account.
Myth
Accounts with less than $10,000 are still required to be reported if
filing threshold otherwise met
Form 3520 (1)
Annual Return to Report Certain Foreign Gifts
• Disclosure required for receipt of:
– More than $100,000 gift from a non-US person or foreign estate
– More than $14,723 from foreign corporations or partnerships
treated as gifts
• Generally, foreign gifts and bequests are not taxable
(beware transfers from companies)
• Filed separately to income tax return, but due date is the
same (including extensions).
• Penalty for not filing – higher of $10,000, or 35% of receipt
Form 3520 (2)
Annual Return of Transactions with Foreign Trusts
• Disclosure required if you are the owner/grantor/settlor of a
non-US trust
• Disclosure required if you made a transfer to, or received a
distribution from a non-US trust
• Penalty for not filing – higher of $10,000 or 35% of
transfer/distribution value or 5% of trust assets “owned” by
the filer
Form 3520A
Annual Return Foreign Trusts with US owner
• Return of a “Foreign Grantor Trust” where the
settlor/grantor is the tax owner of the assets
• Due March 15 – extension available but separately filed to
income tax return extension
• Penalty for not filing – greater of $10,000 or 5% of trust
assets “owned” by the filer.
Form 5471
Return with Respect to Foreign Corporations
• Required annually for Controlled Foreign Corporations
– More than 50% of vote or value held by US shareholders who each
own at least 10%
• Required in any year that an interest exceeds 10%,
increases by 10% or decreases below 10%
• May be “phantom income” inclusion
– Undistributed personal income including investment income and
personal service contracts
• Penalty for not filing - $10,000
Form 8865
Return with Respect to Foreign Partnerships
• Required annually for Controlled Foreign Partnerships
– More than 50% held by at least 10% US partners
• Required in any year that an interest exceeds 10%,
increases by 10% or decreases below 10%
• Thresholds measure share of capital, profits, income or
deductions.
• K-1 is produced for flow through to personal tax return
• Penalty for not filing - $10,000
UK Non-Dom rules
• Resident for < than seven of preceding nine UK tax years:
- Can elect remittance basis without charge
- Lose personal allowance “PA” unless unremitted
foreign income <£2,000.
- Better to report worldwide income and keep PA?
• Resident for > than seven of preceding nine UK tax years:
• £30,000 remittance basis charge
• Unless unremitted foreign income <£2,000
• Charge increased to £50,000 when 12/14 years
• Are you filing a tax return? Should you?
UK Statutory Residence Test
• Automatic residence if any are met:
– Present for 183 days in the tax year in the UK
– UK home available for >90 days and visits for >30 days and either:
a. Only home
b. Overseas home not used for >30 days
– Works full time in the UK for >365 days and >75% days in the UK
• Automatic non-residence:
– <16 days in the UK for leavers
– <46 days in the UK for arrivers
– Full time work abroad and <91 UK days and <31 UK work days
UK Statutory Residence Test
• Significant ties test:
Ties
1
2
3
4
Maximum number of days
Leaver
Arriver
120
182
90
120
45
90
15
40
• Five ties:
–
–
–
–
–
Family resident in the UK
Place to live in the UK for >91 (>16?) continuous days
Work in UK (>3 hours) for >39 days
>90 day in the UK in either either of preceding two tax years
More days in the UK at midnight than any other country
US/UK Treaty Non-residence
• When resident in US and UK under domestic law, may be
UK non-resident based on Treaty tie-break
1. Permanent Home
2. Centre of vital interests (personal and economic)
3. Habitual abode (where you live)
4. Nationality
Questions and discussions
Westleton Drake
9 Devonshire Square
London EC2M 4YF
Tel: +44 (0)20 3178 6041
info@westletondrake.com
www.westletondrake.com