Not come across this situation before and would a appreciate guidance
My client is UK resident and domiciled. He also operates as self employed in the USA and prepares US tax returns and pays tax there. The income is subsequently declared in his UK tax return ( self employed pages) and he gets tax relief for tax paid in the USA.
Question. Are these US earnings pensionable in the UK?
Replies (6)
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Legislation reference
To be eligible for income tax relief for UK income tax purposes, you must be a ‘Relevant UK Individual’ as defined by S189 Finance Act 2004.
.. an individual is a relevant UK individual for a tax year if–
(a) the individual has relevant UK earnings chargeable to income tax for that year,
(b) the individual is resident in the United Kingdom at some time during that year,
(c) the individual was resident in the United Kingdom both at some time during the five tax years immediately before that year and when the individual became a member of the pension scheme, or
(d) the individual, or the individual's spouse or civil partner, has for the tax year general earnings from overseas Crown employment subject to UK tax.
Yes
A trade carried on by a UK resident (wherever it is carried on) is taxable under Part 2 of ITTOIA 2005 by virtue of s 6.
Under FA 2004 s 189(2) relevant UK earnings inlcudes income which is chargeable under Part 2 of ITTOIA.
Anyone checked out the Treaty here?
Most interestingly, Article 7 of the UK/US treaty says that US source business profits are exempt from US tax unless the individual has a permanent establishment in the United States. It is assumed from the question that the client does indeed have a PE in the US or is a US citizen or green card holder.
Given that there is one understands US tax payable on the US source self-employment it might equally be possible to make contributions to a US plan (such as a SEP, IRS, Keogh or solo 401k). These would reduce current US tax but unlike UK pension plans could be entirely enchashed (albeit subject to tax) at a later date if desired.
David Treitel | Managing Director | American Tax Returns Ltd
The Old Exchange, 12 Compton Road, London, SW19 7QD
Tel: 020 3542 6330
Email: [email protected]