# US Additional Child Tax Credits and HMRC



## sjb2016 (May 18, 2016)

Hi All, 

This past weekend I had a mild panic attack when I decided that I should have been reporting the additional cihld tax credit I receive from the IRS every year for my children to HMRC as part of my worldwide income. 

On Monday I spoke with two UK accountants that say they have many US clients that they look after and have never reported this to HRMC as part of a self-assessment. Their argument being that it's not income, it's a tax refund, which HRMC doesn't consider taxable. I like this thought process, but I would also think that the accountants might do a lot of work with US clients living in the UK, but I wonder if many of the clients actually receive the additoinal child tax creidt. 

Anyway, I was just wondering how others treat this money? Do you report it to HMRC as part of your worldwide income on a self assessment form, or do you not bother?

All thoughts appreciated!


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## Crawford (Jan 23, 2011)

How do you get child tax credit from the US when you live and work in the UK?


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## sjb2016 (May 18, 2016)

I receive the additional child tax credit because, like all Americans, I need to file with the IRS every year even though I live in the UK full time. As part of that, I report all my UK income and claim foreign tax credit against those earnings which takes my IRS bill to $0. However, the Additional Child Tax Credit is a refundable tax credit which means that even if I don't owe any US taxes, that money is "refunded" to me into my US bank account.


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## Moulard (Feb 3, 2017)

Here is my take... 

The tax treaties between the US and other countries all allow the US to tax its citizens as if the treaty was not in effect, with the exception of a few items protected by the savings clause.

The treaties also allow the US to provide a tax credit according to domestic law as a means of preventing double taxation. There is nothing that prevents the US from providing a tax credit that is more than the amount of tax paid.

The CTC, the EIP and a host of other all sit under Title 65 of the IRC (which deals with credits, abatements and refunds). 

They could all have equally been enacted under say Title 42 (and be deemed social welfare payments) even if they were paid out as a tax credit rather than say through a social security payment.

Of course, all that is moot if you happen to be audited by HMRC and they do not agree with that view - and wanted to consider it as income. In which case, you would have to rely on the treaty dispute resolution processes between the two competent authorities.. and that would likely take somewhere between forever and never.


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## Nononymous (Jul 12, 2011)

By the same logic the $1200 stimulus benefit would not be declared as income in one's country of residence, as a general rule, since it's technically a tax credit.


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## sjb2016 (May 18, 2016)

Thanks for the replies so far. There were a few capital gains from the sale of shares that I was worried about as well, but they were all under yearly allowances for HMRC so I think I'm ok, unless as Moulard says, I get audited by HMRC and they disagree! 

To be honest, by searching this forum and a few other expat forums I lurk in, I seem to be the only one that has ever worried about it and I find nobody saying, "Help! HMRC are saying I need to pay UK tax on my Additional Child Tax Credit!"


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## jane477 (Jul 6, 2020)

> I receive the additional child tax credit because, like all Americans, I need to file with the IRS every year even though I live in the UK full time. As part of that, I report all my UK income and claim foreign tax credit against those earnings which takes my IRS bill to $0. However, the Additional Child Tax Credit is a refundable tax credit which means that even if I don't owe any US taxes, that money is "refunded" to me into my US bank account.


Wow, I never knew about that and now I have a little heart attack
Do I need to consult with the local IRS manager to see if I'm eligible for the tax credit?


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## sjb2016 (May 18, 2016)

jane477 said:


> Wow, I never knew about that and now I have a little heart attack
> Do I need to consult with the local IRS manager to see if I'm eligible for the tax credit?


There is a decent overview here:

https://www.creditkarma.com/tax/i/what-is-additional-child-tax-credit

I use TurboTax and if you elect to use the Foreign Tax Credit instead of the Foreign Earned Income Exclusion is should walk you through the steps. You need to use the foreign tax credit, as I don't think you'll get the child tax credit if you just exclude your income. You need to have some earned income. 

Also, you might already be receiving it, but if you actually owe US taxes, it might be being applied to offsetting those other taxes already. I'm in a position where more than 99% of my income is UK based with about $250 a year in dividends in the US, so my US tax bill is almost always zero based on foreign tax credit alone. Anyway, do the form and see if you're eligible and good luck!


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## Nononymous (Jul 12, 2011)

jane477 said:


> Wow, I never knew about that and now I have a little heart attack
> Do I need to consult with the local IRS manager to see if I'm eligible for the tax credit?


There is no "local IRS manager" to consult.


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## sjb2016 (May 18, 2016)

Nononymous said:


> There is no "local IRS manager" to consult.


There used to be at the Embassy in London. Really helpful as well! I had a question about how I should handle a workplace pension scheme where I paid more in than the company. I made a proposal and they agreed that would be fine (with the obvious caveats). 

<sarcasm> I'm glad these IRS staff are gone now from the embassies, because if you're one of only two countries in the world that taxes based on citizenship alone, then there isn't a need to support those citizens filing their taxes from foreign countries, is there? All real patriots live in America. If you choose not to live there, though. </sarcasm>


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## Bevdeforges (Nov 16, 2007)

sjb2016 said:


> There used to be at the Embassy in London. Really helpful as well! I had a question about how I should handle a workplace pension scheme where I paid more in than the company. I made a proposal and they agreed that would be fine (with the obvious caveats).
> 
> <sarcasm> I'm glad these IRS staff are gone now from the embassies, because if you're one of only two countries in the world that taxes based on citizenship alone, then there isn't a need to support those citizens filing their taxes from foreign countries, is there? All real patriots live in America. If you choose not to live there, though. </sarcasm>


Actually the staff in the IRS overseas offices were FAR more helpful than the folks back in the Old Country. You also need to be aware of the little factoid that the IRS will not stand behind any opinion rendered by their agents or office staff. You file for the credit and you take your chances. 

This is the TurboTax info on the Child Tax Credit: https://turbotax.intuit.com/tax-tips/family/7-requirements-for-the-child-tax-credit/L3wpfbpwQ


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