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UK Pensions related to UK/US Tax Treaty

UK Pensions related to UK/US Tax Treaty

Old Feb 7th 2020, 5:39 pm
  #106  
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Default Re: UK Pensions related to UK/US Tax Treaty

Originally Posted by bobbyleo View Post
Hi. I am a dual US/UK citizen resident in the UK and have just withdrawn (2020) 25% of my UK Police pension. Is the 25% taken on a government occupational pension subject to different provisions and exempt from IRS tax or is that wishful thinking


Thanks.
No the issue is exactly the same. Is the 25% tax free in the UK subject to tax in the USA?

If you read #97 you will see one success story. If you follow the link I give in #102 you will find lawyers who argue strongly that it is tax free in the US also.
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Old Feb 7th 2020, 6:08 pm
  #107  
 
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Default Re: UK Pensions related to UK/US Tax Treaty

Originally Posted by bobbyleo View Post
Hi. I am a dual US/UK citizen resident in the UK and have just withdrawn (2020) 25% of my UK Police pension. Is the 25% taken on a government occupational pension subject to different provisions and exempt from IRS tax or is that wishful thinking


Thanks.
Your circumstances are different to mine, as at the time I was only a UK citizen and lived in the US. However Article 19 para 2(b) of the UK/US Tax treaty says that for the US to tax your UK government service pension you have to be a US citizen and resident in the US, otherwise the UK tax it. If that argument doesn't work with the IRS read post #97 and the link to the lawyers Mid Atlantic gave in post #102, they look to be at the very least worth a consultation with.

Read the UK/US Tax Treaty, Article 19 deals with Government Service pensions, which have different rules to other pensions. Police Pensions are government service pensions.

Last edited by lansbury; Feb 7th 2020 at 6:14 pm.
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Old Feb 7th 2020, 6:28 pm
  #108  
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Default Re: UK Pensions related to UK/US Tax Treaty

Originally Posted by lansbury View Post
Your circumstances are different to mine, as at the time I was only a UK citizen and lived in the US. However Article 19 para 2(b) of the UK/US Tax treaty says that for the US to tax your UK government service pension you have to be a US citizen and resident in the US, otherwise the UK tax it. If that argument doesn't work with the IRS read post #97 and the link to the lawyers Mid Atlantic gave in post #102, they look to be at the very least worth a consultation with.

Read the UK/US Tax Treaty, Article 19 deals with Government Service pensions, which have different rules to other pensions. Police Pensions are government service pensions.

Good point, which I missed.
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Old Feb 7th 2020, 8:28 pm
  #109  
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Default Re: UK Pensions related to UK/US Tax Treaty

Thanks. Knew it was too good to be true, but expected.

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Old Feb 7th 2020, 9:10 pm
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Default Re: UK Pensions related to UK/US Tax Treaty

Originally Posted by bobbyleo View Post
Thanks. Knew it was too good to be true, but expected.
I think you are misunderstanding what we are saying.

Under Article 19 of the Tax Treaty you don't pay tax to the IRS on your police pension. The 25% disbursement is part of your police pension, is it not?

Reading post #97 there is a further argument there that has been successfully used and should equally apply to government service pensions.

Further call the lawyers named in the link posted by MidAtlantic. They say they offer free consultations, and they say they will advise you what to do. But you have to claim the benefit given under the tax treaty. Bit of work and form filling involved but it should save you paying tax you don't need to pay.
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Old Feb 8th 2020, 8:16 am
  #111  
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Default Re: UK Pensions related to UK/US Tax Treaty

[QUOTE Article 19 para 2(b) of the UK/US Tax treaty says that for the US to tax your UK government service pension you have to be a US citizen and resident in the US, otherwise the UK tax it.
.[/QUOTE]

The 'and' word is interesting and I consider key to my situation, although I did contact a tax professional last year and received this response.....

'Unfortunately, as a US citizen we would expect the pension to be taxed in the US regardless of Articles 17 and 19 of the double Tax Agreement. This is because the US takes the position that the articles of the treaty do not apply to US Citizens'

I am awaiting response from the lawyers that MidAtlantic suggested and will share the relevant parts here.


Thanks



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Old Feb 8th 2020, 9:43 am
  #112  
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Default Re: UK Pensions related to UK/US Tax Treaty

Originally Posted by Pulaski View Post
Please read post #97, the answer is given there. Indeed I would suggest that the answer to your question is the reason that post #97 was made!
A| much simpler question. If one is resident in UK and receiving social security which I understand is taxed in UK, my understanding not taxed in US. If still filing tax return in US, does the social security reported then shown simply as non taxable or does anything else need to be done ?
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Old Feb 9th 2020, 9:07 pm
  #113  
 
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Default Re: UK Pensions related to UK/US Tax Treaty

Originally Posted by bobbyleo View Post
Article 19 para 2(b) of the UK/US Tax treaty says that for the US to tax your UK government service pension you have to be a US citizen and resident in the US, otherwise the UK tax it.
.

The 'and' word is interesting and I consider key to my situation, although I did contact a tax professional last year and received this response.....

'Unfortunately, as a US citizen we would expect the pension to be taxed in the US regardless of Articles 17 and 19 of the double Tax Agreement. This is because the US takes the position that the articles of the treaty do not apply to US Citizens'
If the Articles of the Treaty do not apply to a certain part of the population (US Citizens), I would expect there to be a clause in the treat stating that fact. When I moved to the US I had a government service pension (Met Police), which as I was only a UK citizen was taxed in the UK. When I became a US citizen, 3 years later, the UK ceased to tax that pension, and the US started to tax it. I had fulfilled both parts of the and condition. If I returned to the UK I would expect my government service pension to be taxed there again, and not in the US.

The other thing you might find useful to do is call the UK tax office handling your taxes. If as the tax professional says your government service pension is considered taxable by the US, the UK tax authorities might have a comment to make about that. I assume that pension is currently being taxed in the UK.

So that others reading this thread in the future may follow what we are discussing I have quoted below from Article 19 of the Tax Treaty.


2. Notwithstanding the provisions of paragraphs 1 and 2 of Article 17 (Pensions, Social
Security, Annuities, Alimony, and Child Support) of this Convention:

a) any pension paid by, or out of funds created by, a Contracting State or a
political subdivision or a local authority thereof to an individual in respect of services
rendered to that State or subdivision or authority shall, subject to the provisions of subparagraph
b) of this paragraph, be taxable only in that State;

b) such pension, however, shall be taxable only in the other Contracting State if
the individual is a resident of, and a national of, that State.
So while subpara B gives the conditions which must be meet before the US can tax your pension. Subpara A says where it must be taxed otherwise. Not only is the and important, but the 2 commas are as well.


I am awaiting response from the lawyers that MidAtlantic suggested and will share the relevant parts here.
Glad you contacted them. Please do share their response. While your circumstances are slightly different, in that you reside in the UK while most with these tax issues live in the US, the additional knowledge is useful and interesting to ourselves.



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