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People moving to a different country ‘can face inadvertent tax traps’

US laws mean that American citizens are liable to pay some taxes even if they are not resident in the country.

Meghan Markle may need to be careful that her move to Britain does not lead to a tax headache, it has been suggested.

The American actress is to become a British citizen, but if she retains her US citizenship as well as acquiring a British passport, she could still have to file her taxes to the Internal Revenue Service (IRS), the US tax affairs agency.

US laws mean that American citizens are liable to pay some taxes even if they are not resident in the country.

In February, it emerged that New York-born Foreign Secretary Boris Johnson had given up his American citizenship. 

Mr Johnson was forced to settle an “outrageous” capital gains tax bill following the sale of a house in London ahead of a US mayoral tour.

Speaking generally about what happens when someone from the US moves to the UK, Rachel de Souza, a tax partner at RSM, told the Press Association that broadly speaking, regardless of where an American citizen is resident, they will still have to file a US tax return.

She said: “If they have taxable income in the UK, they also have to file a UK tax return.

“So you can find yourself in the position of having to file a tax return here in the UK and file on the same income a tax return in the US.

“Then the complexities start to get a little more difficult because the UK has this tax year end of April 5 and the Americans have the calendar year as their tax year.”

She continued: “When we’re talking about getting people moving from one country to another… generally, you shouldn’t be worse off because in most cases if you’re going to be say taxed in America on, say X amount of income, you might be taxed in the UK on that same X amount of income.

“But, through the operation of what we call tax treaties between those two countries, one country will give relief, will basically take into account the tax paid in the other country, so you’re not paying tax twice on the same income.”

She added that if an American became a UK citizen this would not mean that they had automatically given up their US citizenship.

She said the US system “is more citizen-based, in that it doesn’t matter where you are resident, it’s the fact that you are a citizen which requires you to file a US tax return”.

Asked if she had any general tax tips for someone moving from overseas, she said: “If you want to ensure that you don’t fall into any inadvertent traps, the best thing to do is to take advice.”

Prince Harry’s father the Prince of Wales will use his Duchy of Cornwall income – the landed estate created in the 14th century for heirs to the throne – to support Harry and Ms Markle in their official duties and private lives.

Charles pays income tax voluntarily on the surplus of the Duchy of Cornwall.

The Duchy is not a company and is not therefore liable to pay corporation tax and Charles is not entitled to receive any capital gains from the Duchy, and therefore does not pay capital gains tax.

Ms Markle and Harry’s official travel will be funded through the Sovereign Grant, paid out of taxpayers’ money.

According to suggestions made in a report in the Washington Post, Ms Markle’s American citizenship could potentially open up the finances of the royal family to further outside scrutiny and cause “tax headaches”.

It is understood that Ms Markle will comply with all tax laws in all jurisdictions as she has done for the past seven years when she was living in Canada as an employee of an American company.

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