New law makes figuring out interaction between US & UK taxes a pain.
By Liz Zitzow - Whoa! What a week it's been. And it's only Tuesday.
Yesterday, I met with nearly 40 other dual US/UK tax preparers, lawyers, and other interested parties to discuss a nasty new UK tax law that will affect any American or greencard holder who's been living in the UK for more than seven years.
Currently, a "nondomiciled" person resident in the UK pays tax only on UK source income. Most Americans living in the UK are considered "nondoms". The US/UK tax treaty was signed and arranged with this fact in mind.
The proposed new law would require that any "nondomciiled" person resident in the UK for more than seven years must either pay a £30,000 flat fee or else pay tax on their worldwide income. The question is whether opting to pay the £30,000 would constitute a tax for purposes on the treaty. If they opt to pay tax on their worldwide income, as it is an optional income tax (they could opt to pay the £30,000 instead), is this an allowable tax under treaty? Also in question is how this £30,000 would flow through as a tax credit, if at all, to the US return. Well, there were a lot of swings and roundabouts, no conclusions, and a general feeling that they're gonna get you no matter which way you turn.
This is a very gray area, with no precedents yet. Most people earning a typical middle class income aren't going to want to pay to have a revenue ruling on the situation. We're going to have to make an educated best guess (unhappily, slapped with our new requirement to be more likely than not) as to what the IRS may or may not do with taxpayers facing this new UK tax.
Today, I met with five prospective clients and got them to sign on the dotted line for work to be prepared in January. I have yet to crack open a file and crunch any numbers.
Luckily tonight, the hubby isn't coming home for dindins, so that's another three hours of pure number-crunching. And tomorrow's clear of appointments, so that's a good solid eight hours to crunch as well.
My 17 Dec deadline is looming. 17 Dec is my 15 Apr. Overseas filers have until 15 Dec, rather than 15 Oct. And 15 Dec is a Saturday, giving me until Monday 17 Dec. Depending on how many last-minute people finally swing their stuff at me, I'm either going to be totally exhausted or completely wiped out by the 17th. I don't think "relaxed and sipping a chilled wine" is in the cards this year, at least not until I get on the plane at 6 pm and head for the states for the holidays.