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American Dual tax issue - house purchase

D

Deleted 164106

Guest
Hi All,

I'm marrying an American if this pandemic ever finishes. As part of this, we'll be buying a house together - luckily, she earns more than me, so we'll be able to afford a decently sized place, even though we're in London.

Unfortunately, what with her being a Yankee and that, if her name goes on the deeds of the house and we sell it down the line she'll get taxed in the US. This has brought us to the conclusion that we need to have both our incomes considered when the Bank is looking at affordability / lending, but only my name on the deeds.

Has anyone with knowledge of the Mortgage industry seen this / got experience of doing this? I have heard that it may be possible with something called a "tenancy in common" - but would be good to hear from people with either first-hand experience of this (I know, a long shot) or who are CeMap qualified / in the industry.

How do we go about this? Is it easy / possible? I'll call the Bank when I can be bothered, but tried today and didn't want to wait 40 minutes for an answer.

Cheers.
 
You can be joint tenants (which is what most people have) that would mean you are both treated as a single entity.

Tenants in common is essentially having shares in the property e.g if the property was £500,000, you put £100k in and she put £400k in you could set it up as tenants in common as a 20/80 share.

Either way you would still both own the property, which leaves you in the same predicament.

You could look at creating a trust, putting the house in it and making her a beneficiary.

You could look at having the house solely in your name, but she raises a charge against it, much the same way a mortgage company does.

I really don’t know if either of these would work, or are even legal, but it might give you a starting point for further research. It would well be worth the money to see a solicitor specialising in property law, it’s perfectly legal to try and avoid paying tax.
 
D

Deleted 164106

Guest
You can be joint tenants (which is what most people have) that would mean you are both treated as a single entity.

Tenants in common is essentially having shares in the property e.g if the property was £500,000, you put £100k in and she put £400k in you could set it up as tenants in common as a 20/80 share.

Either way you would still both own the property, which leaves you in the same predicament.

You could look at creating a trust, putting the house in it and making her a beneficiary.

You could look at having the house solely in your name, but she raises a charge against it, much the same way a mortgage company does.

I really don’t know if either of these would work, or are even legal, but it might give you a starting point for further research. It would well be worth the money to see a solicitor specialising in property law, it’s perfectly legal to try and avoid paying tax.
Thank you. We will likely end up visiting a property solicitor - I would rather chuck a couple of hundred quid at the problem now than get smashed later down the line.

I'm all for (legally) minimising my tax liability.
 

Robme

LE
You can be joint tenants (which is what most people have) that would mean you are both treated as a single entity.

Tenants in common is essentially having shares in the property e.g if the property was £500,000, you put £100k in and she put £400k in you could set it up as tenants in common as a 20/80 share.

Either way you would still both own the property, which leaves you in the same predicament.

You could look at creating a trust, putting the house in it and making her a beneficiary.

You could look at having the house solely in your name, but she raises a charge against it, much the same way a mortgage company does.

I really don’t know if either of these would work, or are even legal, but it might give you a starting point for further research. It would well be worth the money to see a solicitor specialising in property law, it’s perfectly legal to try and avoid paying tax.
The trust, works fine but you will need to consider length of time. Ie if the trust was set up to avoid tax etc, then the longer the trust is in operation the more tenuous the link. Councils are like bloodhounds when it comes to trusts, if you ever need to look at Care home fees from council resources as an example. Tax men are equally tenacious.
I have always liked the charge route (which is how my wife and I’s wills are set up), which enables you to use the charge as collateral if nessassary. However ensure you build a % of the house growth or you may loose out.
As I am not a practising solicitor, you really do need to seek one out (when the China plague pisses off) to set this up properly.
 
You need to check US tax law first.

If she lives in the house for two years, she’ll get a $250k exclusion from CGT for the sale of the Primary Residence, which would be offset against half of the gain if you have joint ownership. So for her to be liable for CGT it’s got to rise in value by £400 grand at today’s exchange rate. In fact it’s more as there’s a depreciation clause.

I think you’ll find she looses the offset if it’s held in a trust of which she is a beneficiary.

Get some proper US tax advice; it’s US tax that she is trying to avoid.
 
You need to check US tax law first.

If she lives in the house for two years, she’ll get a $250k exclusion from CGT for the sale of the Primary Residence, which would be offset against half of the gain if you have joint ownership. So for her to be liable for CGT it’s got to rise in value by £400 grand at today’s exchange rate. In fact it’s more as there’s a depreciation clause.

I think you’ll find she looses the offset if it’s held in a trust of which she is a beneficiary.

Get some proper US tax advice; it’s US tax that she is trying to avoid.

Bear in mind that there is a UK-US tax treaty; the intent of which is to avoid dual taxation.

As @bobthebuilder says, I’d get some professional advice from an accountant or tax lawyer versed in the treaty
 
Bear in mind that there is a UK-US tax treaty; the intent of which is to avoid dual taxation.

As @bobthebuilder says, I’d get some professional advice from an accountant or tax lawyer versed in the treaty

Thirded.

We use a bloke in NY who is a British Chartered Accountant that is also qualified in the US. You will find a few blokes dotted around London who service the expat community and understand both systems.

I don't have much to do with the tax admin as the Mrs earns all the legal money, but I do know Uncle Sam requires us to declare all our UK bank accounts and interest received, my UK Army pension, along with basically any other cash incomings in the UK.

Bearing in mind the Mrs has been a director of a business division of a UK bank and also a US bank she know the ins and outs of who gets told what. All I can say is do not assume that the US do not know about any UK bank accounts held in a US citizens name.......there's a hint for you.

@Toppet , also slight tangent, does your Mrs still pay into the US social security pot? If not she should consider it as she can double dip on UK and US pensions. The Mrs used to work with a few US personnel in Canary Wharf and part of their deal was that the bank also paid their US social security payments for them for the duration of their posting, be it 3 years or 12 years. I still pay into the UK pot to be able to get the full benefit of a UK state pension along with a US pension in due course.
 
D

Deleted 164106

Guest
Thanks everyone - appreciated.

@Toppet , also slight tangent, does your Mrs still pay into the US social security pot? If not she should consider it as she can double dip on UK and US pensions. The Mrs used to work with a few US personnel in Canary Wharf and part of their deal was that the bank also paid their US social security payments for them for the duration of their posting, be it 3 years or 12 years. I still pay into the UK pot to be able to get the full benefit of a UK state pension along with a US pension in due course.
Not sure - will investigate.

I doubt it though; she's been here her entire adult life after finishing her masters.
 
Thanks everyone - appreciated.


Not sure - will investigate.

I doubt it though; she's been here her entire adult life after finishing her masters.

Probably not then.

I asked the Mrs about the house thing. She says that here in the US as long as we live in the house for a couple, or three years, we would not be liable to pay tax on around the first $500k of any profit we make. So you should be safe, but still,go have a chat with someone.
 
What do you do? Pimping and drug running?

Would not do either of those.

I still fix up houses, as and when, been doing that since I left the army and went to uni. It turned out to be better paying than getting a job and gave me the flexibility to look after the kids and zot off skydiving and shooting whenever I could fit it in. I just get quietly tucked away on the joint tax return as the Mrs has the sensible job.
 

Blogg

LE
Thirded.

We use a bloke in NY who is a British Chartered Accountant that is also qualified in the US. You will find a few blokes dotted around London who service the expat community and understand both systems.

I don't have much to do with the tax admin as the Mrs earns all the legal money, but I do know Uncle Sam requires us to declare all our UK bank accounts and interest received, my UK Army pension, along with basically any other cash incomings in the UK.

Bearing in mind the Mrs has been a director of a business division of a UK bank and also a US bank she know the ins and outs of who gets told what. All I can say is do not assume that the US do not know about any UK bank accounts held in a US citizens name.......there's a hint for you.

@Toppet , also slight tangent, does your Mrs still pay into the US social security pot? If not she should consider it as she can double dip on UK and US pensions. The Mrs used to work with a few US personnel in Canary Wharf and part of their deal was that the bank also paid their US social security payments for them for the duration of their posting, be it 3 years or 12 years. I still pay into the UK pot to be able to get the full benefit of a UK state pension along with a US pension in due course.

Assume full transparency in terms of UK-US in bank account terms

All long enshrined in FATCA which obliges Financial Institutions outside the US to capture and report information to the IRS thanks to intergovernmental agreements.

Also Common Reporting Standard now applies.

This is the reason why the likes of Boris Johnson along with a great many others have formally renounced their technical US citizenship (and therefore bring always liable to tax worldwide) by virtue of just happening to be born in the USA
 
Assume full transparency in terms of UK-US in bank account terms

All long enshrined in FATCA which obliges Financial Institutions outside the US to capture and report information to the IRS thanks to intergovernmental agreements.

Also Common Reporting Standard now applies.

This is the reason why the likes of Boris Johnson along with a great many others have formally renounced their technical US citizenship (and therefore bring always liable to tax worldwide) by virtue of just happening to be born in the USA

Not just UK - US, more or less anywhere in the civilised banking world. There are not many offshore havens available to the "businessman with an imaginative accountant" anymore.
 
You need to triple check the US tax situation and try and tackle it from that perspective. Unless you are able to get the mortgage outright on your own salary/income, she will need to be on the deeds for you to borrow from the bank, the only other way would be for her to lend a huge sum of money as a second charge holder which is messy so if you are looking for a standard mortgage from a high street bank at normal rates you would really need her on the deeds too. It’s worth also pointing out that if she keeps the US property, you will pay more in stamp duty as she will own more than one property. It doesn’t matter that it’s outside the UK. If you decide to go ahead then let me know. I can do you a good deal on conveyancing costs.
 

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