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UK Government Service Pensions & US Citizenship

UK Government Service Pensions & US Citizenship

Old Feb 9th 2009, 7:24 pm
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Default UK Government Service Pensions & US Citizenship

Have been to the CPA today and now have the definitive answer to the question. The CPA in question has someone in the office who is an expert on US/UK tax matters and they deal with several British LPR.

Firstly before I even got to ask anything at the start of discussing 2008 taxes he asked me if I was still a registered alien.

At present if you are a LPR and in receipt of a UK Government Service pension this pension can only in accordance with the US/UK Tax Convention of 2001 be taxed in the UK and does not have to be declared on your US tax return.

The question I then asked was. "I am able to apply for US Citizenship later this year if I receive my Citizenship will this effect how my taxes are done.

The answer was an unequivocal "Yes your UK Government Service pension will then have to be reported on your US tax return. It will continue to be taxed in the UK and any tax paid there can be claimed against tax due in the US. If more tax is due in the US than paid in the UK you pay the balance to the IRS. If less tax is due in the US than paid in the UK you do not get the difference back. In other words you pay tax at the highest rate regardless of which country has it.
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Old Feb 9th 2009, 7:51 pm
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Default Re: UK Government Service Pensions & US Citizenship

Originally Posted by lansbury View Post
In other words you pay tax at the highest rate regardless of which country has it.
Disappointing, if not surprising, but I'm sure that many people will be grateful for the definitive answer.
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Old Feb 9th 2009, 7:53 pm
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Default Re: UK Government Service Pensions & US Citizenship

Thanks for posting.

Seems a bit odd however; as I was of the understanding that an LPR filling in a tax form had to do it exactly the same as a citzen anyway.

But regardless, it seems that the answer is that no-matter what, the UK will tax it come what may.
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Old Feb 9th 2009, 8:02 pm
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Default Re: UK Government Service Pensions & US Citizenship

Originally Posted by Dan725 View Post

Seems a bit odd however; as I was of the understanding that an LPR filling in a tax form had to do it exactly the same as a citzen anyway.
It is important to note that this only applies to Government Service as defined in Article 19 of the 2001 Tax Convention.

Any other UK income regardless of tax being deducted in the UK has to be declared on the US tax return.

Government Service does not include the State Retirement Pension.
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