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Exemption from UK Income TAx

Exemption from UK Income TAx

Old Nov 19th 2009, 3:34 pm
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Default Exemption from UK Income TAx

HMRC have taxed me on a private annuity and interest earned in the UK even though on my tax return I stated I have lived in the US since 2006. They have done it for 2008-09 claiming I owe several hundred pounds of unpaid tax. They state the exemption from UK income tax is not automatic and has to be claimed. They say I am due the exemption but until I fill out the form and claim it I have to pay UK income tax.

Has everyone had to fill out a Form US-Individual 2002 to claim exemption from UK income tax and I've just overlooked that I had to do so?

If anyone is interested the form is here:-

http://www.hmrc.gov.uk/cnr/us_individual_2002.pdf
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Old Nov 19th 2009, 4:27 pm
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Default Re: Exemption from UK Income TAx

Yes you need to fill out the HMRC form US-Individual 2002 and an IRS Form 8802 together with a check for $35 and send them both to Philadelphia (address on 8802 instructions). The IRS send the certified form to HMRC and about four months later you receive a letter from HMRC stating that your pensions/annuities are now exempt UK tax. Another two months later you receive a PAYE coding notice from HMRC Cardiff giving your new UK tax code as NT (no tax) and stating they have notified your pension/annuity provider and instructed them to repay you any tax paid.

I’ve just gone through the whole process for my wife who has a UK State pension, an NHS pension and two annuities. We now receive them all tax free into our Isle of Man bank account and declare them on our US tax return.
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Old Nov 19th 2009, 5:30 pm
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Default Re: Exemption from UK Income TAx

Thanks Zonie appreciate the information. I'll wait until I get my citizenship next month (hopefully) and claim the exemption on everything in one go.
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Old Nov 19th 2009, 8:55 pm
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Default Re: Exemption from UK Income TAx

You don't have to wait until you're a US Citizen. As long as you're considered resident in the US you benefit from the same tax treatment.
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Old Nov 19th 2009, 11:49 pm
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Default Re: Exemption from UK Income TAx

Originally Posted by Peter Newton
You don't have to wait until you're a US Citizen. As long as you're considered resident in the US you benefit from the same tax treatment.
I have a Government Service Pension which is treated differently. When I become a US citizen then the US tax that pension and not the UK. As I hopefully will be a citizen in the next few week unless you advise differently I might just as well wait and send the forms in when I have citizenship. Otherwise I think I would have to submit another form in a few weeks to cover my GS Pension and as I get back any tax I shouldn't have paid it seems easier to do it all together.
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Old Nov 20th 2009, 1:29 pm
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Default Re: Exemption from UK Income TAx

Originally Posted by lansbury
I have a Government Service Pension which is treated differently. When I become a US citizen then the US tax that pension and not the UK. As I hopefully will be a citizen in the next few week unless you advise differently I might just as well wait and send the forms in when I have citizenship. Otherwise I think I would have to submit another form in a few weeks to cover my GS Pension and as I get back any tax I shouldn't have paid it seems easier to do it all together.
Unfortunately that's not right- you probably read IRS pub 901 page 33 right? Where it says that income from UK government pensions isn't taxable in the US unless the recipient is BOTH a resident AND citizen of the US?

The IRS pub is very misleading. The US-UK tax treaty is very clear that if you're considered resident in the US, then income from UK government pensions is taxable in the US, even if you're not a US citizen. If you PM me I can send you the references.
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Old Nov 20th 2009, 6:44 pm
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Default Re: Exemption from UK Income TAx

Originally Posted by Peter Newton
The US-UK tax treaty is very clear that if you're considered resident in the US, then income from UK government pensions is taxable in the US, even if you're not a US citizen.
Just to be clear, if you're a permanent resident in the US this rule applies to you.

Last edited by Peter Newton; Nov 20th 2009 at 6:45 pm. Reason: Clarity
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