US citizens are taxed on their world wide income regardless of where they live. The tax returns of these individuals involve a complex set of rules and the use of the US/UK treaty in order to eliminate double taxation across the two jurisdictions.
There are many US Citizens that reside in the UK for a short term perhaps to set up a business or on secondment with their employer that will require US and UK filings to be prepared.
Many US citizens also find themselves in the UK long term with dual filing requirements. Once the individual has been resident in the UK for 7 out of the last 9 years, their UK filing requirements become complicated and with the US interaction the decision whether to file on the remittance basis, and pay the RBC or arising basis and pay tax on worldwide income in the UK is not a simple one. The US and UK returns should ideally be prepared together to ensure symmetry between the two tax returns , help eliminate double tax and minimise the worldwide tax rate suffered on each source of income.
Furthermore where a US citizen has an interest in a foreign company, trust or partnership, there can be US tax consequences, additional filing requirements and in some cases, double taxation.
Green card holders
An individual issued with a Green Card is considered a lawful permanent resident of the US even if that person is living abroad. Green Card holders are treated as US resident for US income tax purposes subject to US tax on worldwide income. In most cases, a US tax return must be filed annually.
Careful planning and awareness of these issues can help to minimise US tax consequences.
If you would like to speak to us about any of the issues raised above please contact us.