UK-US double tax

double tax relief in the UK

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My client is British, but has lived and worked in the US for many years.  She has now retired and returned to the UK - probably permanently.  She wants to remain a US citizen at least for now, so my understanding is that the saving clause in the double tax treaty will be triggered in the US, which basically means she remains taxable in her worldwide income in the US.

SO if she were not a US citizen, her US (non social security) pension would be taxable in the UK from the point at which she became UK resident.  I assume it still is, but can we claim double tax relief of the US tax paid?  The UK US double tax treaty gives the UK taxing rights on this income, but the saving clause apparently negates that....

I assume all UK income remains taxable in the UK in the usual way aqnd she will get tax credit relief in the US for any UK tax paid..........

Thank you for your help

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By David Treitel
28th Jul 2021 08:54

Because the client is a US citizen, she will continue to report worldwide income and gains in the US and file US information returns each year - including FBARs.

Under Article 17(3) of the treaty, US social security pension income is completely exempt from US tax for a UK resident. There is no double taxation and consequently no double tax relief to be considered in the UK.

David Treitel | Managing Director | American Tax Returns Ltd
The Old Exchange, 12 Compton Road, London, SW19 7QD

Tel: 020 3542 6330
Email: [email protected]

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Replying to David Treitel:
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By snickersinatwix
28th Jul 2021 10:06

Thank you David, that is very helpful - I had misread the article re the social security pension so thank you for clarifying.

So both the private US pension and the US Social security pension are taxable in the UK under the double tax treaty.

But as she remains a US citizen, she remains taxable in the US on her worldwide income due to the saving clause. Does this not override the double tax treaty?

Which would mean both sources of income are taxable in both countries. Which country gets "first dibs" and just taxes it, and which country taxes it but can claim double tax relief for the tax paid in the other country?

Because of the way the double tax treaty is worded, I am thinking UK is the main taxer and my client will claim double tax relief in the US on any income which is taxed twice as a result of their savings clause. I would really appreciate if anyone can clarify...

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Red Leader
By Red Leader
28th Jul 2021 12:06

Are you sure your client is a US citizen as well as being a UK citizen (as opposed to resident)?

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