The US Healthcare Penalty and the UK National Health Service

Question

Dual US/UK nationals have full access to the National Health Service (NHS) by virtue of their British citizenship. They are also required to file US taxes by virtue of their US citizenship.

Recent US legislation stipulates a so-called 'healthcare penalty' if the taxpayer does not purchase health insurance under an approved scheme.

The NHS is not listed. The reasons for this could be that it is such a 'corner case' that the IRS did not consider it; OR its omission was intentional (in which case dual nationals be liable to the penalty).

Can the NHS be safely used as an exemption to the healthcare penalty? If so, what documentation would a person have to substantiate their exemption?

Answer 1

As a dual US/UK citizen if you live outside the US, you are eligible for an exemption for health coverage. If you are living in the US, then you are not an "ordinary resident" of the UK, despite the fact that you are a UK citizen, and you will not be covered by the NHS. According to the NHS:

If you are moving abroad on a permanent basis, you will no longer be entitled to medical treatment under normal NHS rules. This is because the NHS is a residence-based healthcare system.

There is the possibility that a corner case exists where the UK considers you an ordinary resident and hence you are covered by the NHS, but that the US does not consider you a resident. If you fall into that case, it is probably worth talking to a professional tax consultant, since you are likely going to have all sorts of issues.