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Warning on UK Tax Relief forms.

Warning on UK Tax Relief forms.

Old Feb 23rd 2015, 3:10 pm
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Default Warning on UK Tax Relief forms.

This is an FYI based on my experience..
As a US Resident Alien I started claiming UK State Pension in Mid 2013. It is sent free of any UK taxes. (Based on threads on this forum I submit it on 1040 line 16) - no problem.
However I also have what was called a Frozen UK Pension based on previous job.
To be able to start receiving drawdowns on this pension such that I do not pay UK taxes on it, I was advised by UK advisor to first complete IRS Form 8802 with HMRC form 2002.
It took over 6 months to finally get a reply back from HMRC where they said that they could not process the 2002 UNTIL I had already received at least one drawdown payment from this pension.
They also said that if/when I activated drawdown payments I would then have to totally resubmit the 8802/2002 forms (they would not hold the old ones for me..)
So I have just received my first annual drawdown payment and had it taxed in UK at 20%. I guess now I can resubmit my forms (AND the fee for processing the forms..).
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Old Feb 24th 2015, 3:21 am
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Default Re: Warning on UK Tax Relief forms.

A similar thing happened to me. By the time I had filed and the forms processed I had received 2 pension payments less tax from my UK pension provider, but they refunded the 2 months tax in my 3rd monthly payment.
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Old Feb 24th 2015, 1:02 pm
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Default Re: Warning on UK Tax Relief forms.

That's interesting durham_lad... I am doing annual drawdowns starting November last year(They charge me a hefty fee for every transfer no matter how small).
They had recently sent me a PAYE statement and I assumed I needed to claim Foreign Tax Credit from IRS in April this year...
btw, I am also in Texas(Houston) but whole family was from Sunderland!
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Old Feb 24th 2015, 1:27 pm
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Default Re: Warning on UK Tax Relief forms.

BTW durham_lad - do you submit your pension payments on line 16 of your 1040??
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Old Feb 24th 2015, 1:42 pm
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Default Re: Warning on UK Tax Relief forms.

Originally Posted by Dave1946
That's interesting durham_lad... I am doing annual drawdowns starting November last year(They charge me a hefty fee for every transfer no matter how small).
They had recently sent me a PAYE statement and I assumed I needed to claim Foreign Tax Credit from IRS in April this year...
btw, I am also in Texas(Houston) but whole family was from Sunderland!
I still have a UK bank account into which the monthly pension is paid, and when I need any of it in the USA I use XE.com to transfer to my US bank.

I was born and grew up in Seaham Harbour, 5 miles south of Sunderland and now live in The Woodlands just north of Houston.


Originally Posted by Dave1946
BTW durham_lad - do you submit your pension payments on line 16 of your 1040??
I actually enter it on line 21 on the 1040 (Other income), and label it as "FOREIGN PENSION - {company name}, UK". I used to report it on line 16 but was advised that line 21 is the correct place. Makes no difference tax-wise so I don't suppose the IRS really cares.

To convert it from pounds to dollars I use the published IRS average tax rate which is shown here.

Yearly Average Currency Exchange Rates
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Old Feb 25th 2015, 5:04 pm
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Default Re: Warning on UK Tax Relief forms.

durham_lad - THANKS for interesting and useful info. I have seen lines 16 AND 21 mentioned, but as you say it should not matter.
I have a UK bank account but SIPP charges same fees no matter whether sent to UK or USA. So not sure whether that would help me.

I was hoping I could put my UK STATE pension on line 20 along with my US Social Security but that doesn't seem to be correct. Forum posts seem to say that I should put that on line 16

Do you ever get questioned about the 'amount' of money you transfer via XE.Com? I already have approx. $50k in LLoyds account. Would like to bring most of that over but worry if they ask questions about origin even though I declare it each year in FBAR.

Parents & Family all born near Fulwell Sunderland. 1945-My 'future' Dad walked from S'land to Croydon to get a job and that was where I was born. Spent 2-week holiday in S'Land for first 17 years of my life. Now live in Missouri City!
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Old Feb 25th 2015, 5:41 pm
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Default Re: Warning on UK Tax Relief forms.

Originally Posted by Dave1946
durham_lad - THANKS for interesting and useful info. I have seen lines 16 AND 21 mentioned, but as you say it should not matter.
I have a UK bank account but SIPP charges same fees no matter whether sent to UK or USA. So not sure whether that would help me.

I was hoping I could put my UK STATE pension on line 20 along with my US Social Security but that doesn't seem to be correct. Forum posts seem to say that I should put that on line 16

Do you ever get questioned about the 'amount' of money you transfer via XE.Com? I already have approx. $50k in LLoyds account. Would like to bring most of that over but worry if they ask questions about origin even though I declare it each year in FBAR.

Parents & Family all born near Fulwell Sunderland. 1945-My 'future' Dad walked from S'land to Croydon to get a job and that was where I was born. Spent 2-week holiday in S'Land for first 17 years of my life. Now live in Missouri City!
Interesting past, thanks for sharing. I think my family moved to Seaham in the late 19th century with coal mining and never left until I moved to Houston in '87, and my brother moved to Australia in '94, where he is still mining coal, although these days he is a manager of a coal mine.

With XE.com I never bothered to increase the default limit I received of $10,000 to send money, and when we did have an inheritance of about £25 to move over from the UK a few years ago my UK bank had a limit of £15,000 so I moved it in 2 transactions a couple of days apart.

Each time I send any amount of money using XE.com I have to indicate on a drop down pick-list of reasons. (Expenses, gifts, and a couple more options). I think they have to record a reason these days by law, although one of the drop down options for the reason is not "terrorist funding", or "money laundering"

I sent over $1,000 just a week or so back and still had to give a reason.

Last edited by durham_lad; Feb 25th 2015 at 5:46 pm.
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