Double Taxation of US Citizens

Posted onNovember 24, 2021

A series of immigration articles on US immigration to the UK

Whilst OTS Solicitors is an internationally recognised law firm based in London with a wide range of expertise to support business and private clients in all areas of individual immigration and business immigration law we do not profess to be international tax experts. We do however know enough about US to UK relocation to appreciate that prior to sorting out a business visa, work visa or family visa it is best to get taxation advice from an expert on double taxation of US citizens. That way, combined with specialist US to UK immigration legal advice you can make informed decisions about your planned move from the US to the UK.

UK Online and London Based Immigration Solicitors

For advice on any aspect of US to UK relocation and immigration law call the expert London immigration lawyers at OTS Solicitors on 0203 959 9123 or contact us online.

Double taxation and US to UK immigration

If we are all totally honest no one likes paying tax. Therefore, the term ‘double taxation’ can give even the most laid-back US citizen looking to relocate to the UK serious concern and, without the right specialist immigration law and financial advice, even question whether a move from the US to the UK is financially feasible or prudent. There would have to be a very strong ‘pull factor’ for any person looking to move to the UK on a temporary or permanent basis to be willing to ignore the threat of double taxation or to not take steps to understand how the US double taxation rules might affect them.

US taxation

US citizens and green card holder are liable to pay US taxes, regardless of whether they are living in the US or not and regardless of whether they have dual US and UK nationality. The same rules apply if you are a child of US citizens and you were born outside the US or a child of non-US nationals born in the US.

The US tax rules can lead to double taxation jeopardy. This can be minimised by use of a tax treaty between the US and UK , sorting out your tax affairs, getting expert joined-up immigration law and US and UK tax advice and, once you meet the eligibility criteria for British citizenship, applying for naturalisation as a British citizen and renouncing your US citizenship.

You may think that double taxation is not an issue for you as the US has a double taxation agreement with the UK. That means that although the US taxes the worldwide income of its US citizens, the US and UK double tax treaty means if you have already paid tax on your earnings in the UK you probably won’t have to pay double tax on the same income, subject to tax rates in the UK and US. However, even if no double tax is due, a US citizen living in the UK normally still needs to file a tax return in the US. Failure to do so could lead to penalties or not being able to apply to renounce US citizenship as one of the eligibility criteria to renounce your US citizenship is being up to date with your tax and your returns.

Whilst you may think that your tax affairs are straight forward and will be covered by the US and UK double taxation treaty, complexities can arise where:

There are different capital gains rules on the tax on disposal of assets.
You are self-employed.
You receive trust income or distributions or family gifts.
You have business, pension or investment assets.

Getting immigration and tax advice before your planned move to the UK and prior to acquisitions or making disposals of assets can significantly reduce the risks of double taxation as even though you may not be expected to pay double income tax because of the existence of the US and UK tax treaty it makes financial sense to minimise your US tax bill when you have chosen to relocate to the UK and are no longer living in the US.

Double taxation – best left with the experts

Double taxation does not just catch out the unwary US citizen looking to relocate from the US to the UK. Prime minister, Boris Johnson, was allegedly caught out whilst he was the mayor of London. Why ? He was born in the US and therefore had dual UK and US citizenship. Reportedly, the US tax man came calling when he made a gain on a UK property sale. As the sale of the property was his main home it was not a taxable sale under UK law but it was under US tax law. Boris Johnston was reportedly liable for the tax as he was technically a US citizen living abroad even though he had left the US at the age of five. For Boris Johnston the long-term solution was to renounce his US citizenship, a decision he probably wished that he had made before the sale of his family home triggered the US tax charge.

Working with your tax advisors

As US to UK immigration law experts, we advise on:

US to UK visa options.
Double taxation tax treaties between the US and UK.
Investment rules and investor visa
Investment rules and UK immigration rules for entrepreneurs. For example, in relation to the innovator visa.
Meeting the financial requirement for family visa and spouse visa applications including cash savings and investment rules.
The definition of habitual residence in the UK.
The legal definition of domicile in the UK and why it matters.
UK visas that offer accelerated settlement so you can become a British citizen quicker than under other visa routes.
The UK residence requirement for settlement in the UK ; for indefinite leave to remain and British citizenship applications.
The option of British citizenship or dual US and UK nationality.

We can work with your existing US or UK financial advisors, personal and company accountants, international bankers and trustees and your global mobility experts.

Leading international immigration attorneys

If a professional advisor professes to be an expert in US and UK taxation treaties as well as in US to UK immigration law and handling Home Office visa applications then examine their credentials. At OTS Solicitors we do not hold ourselves out as international tax experts but we do know enough about double taxation of US citizens to either work with your existing financial advisor or accountant or to refer you to a trusted advisor.

Our credentials as experts in global mobility and international relocation for business, work or family reasons include recognition in two leading law directories and awards:

UK Online and London Based Immigration Solicitors

For advice on US to UK relocation options, acquiring British citizenship and renouncing US citizenship or any aspect of immigration law call the immigration team at OTS Solicitors on 0203 959 9123 or contact us online.