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UK- USA tax treaty

UK- USA tax treaty

Old Mar 30th 2011, 7:12 pm
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Default UK- USA tax treaty

I read the treaty and I wonder if the first article answers the seemingly unanswered question "in the interest on UK cash ISA's taxable in the US"?

Paragraph 2 of Article 1 as copied below seems to suggest that the IRS will respect the "benefit" given by HMRC in that the tax free status of ISA's isnt undone by having to pay tax on your interest in the UK. ???

Surely then, tax free interest can be entered in line 8b on 1040 ???

UK USA tax treaty
ARTICLE 1
General Scope
1. Except as specifically provided herein, this Convention is applicable only to persons
who are residents of one or both of the Contracting States.
2. This Convention shall not restrict in any manner any benefit now or hereafter
accorded:
a) by the laws of either Contracting State; or
b) by any other agreement between the Contracting States.
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Old Mar 30th 2011, 7:13 pm
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Default Re: UK- USA tax treaty

Is the interest on UK cash ISA's taxable in the US"?

sorry about typo.
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Old May 4th 2011, 4:45 pm
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Default Re: UK- USA tax treaty

Originally Posted by chopper40 View Post
Is the interest on UK cash ISA's taxable in the US"?

sorry about typo.
Bump.

Anyone?
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Old May 4th 2011, 5:31 pm
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Default Re: UK- USA tax treaty

My understanding is that they are subject to taxation in the US (assuming you are resident in the US for tax purposes), because it is not a "benefit" within the context of the treaty. There's isn't much point to ISAs imo because the US has such a low capital gains tax and ISAs are typically used primarily as a capital gains tax avoidance vehicle.

Certainly Canadian TFSAs (which were based on the UK ISA) are subject to US CGT if a Canadian resident becomes a US resident, that I know for sure and the US-Canada tax treaty is significantly more comprehensive than the UK-US tax treaties.

If you were to claim a tax treaty benefit, note that it's not simply a case of putting it down in the right box on the 1040, you must specify it on Form 8833.
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Old May 4th 2011, 5:36 pm
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Default Re: UK- USA tax treaty

I called a very helpful tax adviser at the USA embassy in London. As stated above, cash ISA's are not tax free in the eyes of the IRS.

I have cash ISA savings in the UK and there is really no point anymore, now that I'm a LPR.
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Old May 4th 2011, 7:19 pm
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Default Re: UK- USA tax treaty

Originally Posted by chopper40 View Post
I called a very helpful tax adviser at the USA embassy in London. As stated above, cash ISA's are not tax free in the eyes of the IRS.
I have cash ISA savings in the UK and there is really no point anymore, now that I'm a LPR.
Hi,

Reverse question if anyone knows:

Does the UK tax the distributions of a Roth IRA if you are resident in the UK?
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Old May 4th 2011, 7:47 pm
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Default Re: UK- USA tax treaty

Originally Posted by Xebedee View Post
Hi,

Reverse question if anyone knows:

Does the UK tax the distributions of a Roth IRA if you are resident in the UK?
No. ROTHs are specifically covered in the treaty and they are tax free in the UK to the same extent as in the US and they are excluded from the savings clause.
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Old May 8th 2011, 5:13 am
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Default Re: UK- USA tax treaty

Originally Posted by chopper40 View Post
I called a very helpful tax adviser at the USA embassy in London. As stated above, cash ISA's are not tax free in the eyes of the IRS.

I have cash ISA savings in the UK and there is really no point anymore, now that I'm a LPR.
Now that I'm more awake - ISAs are a tax benefit for a UK resident taxpayer. Obviously as a non-resident there is no benefit hence the tax treaty is irrelevant.
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