American Citizens Abroad Town Hall Seminar Daniel Hyde 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$9,750 – Married filing Jointly$19,500 – Married filing Separately$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 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. – 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, 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: Maximum number of days TiesLeaverArriver 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)