Reporting IRA distribution on UK tax return - what to write in the white space?

Hello.  I have an Inherited IRA which I take RMDs from.  I have been reading the (very informative) other threads here and I now know that I should report this as foreign pension income on my UK tax return and then use the white space to "elect" into the double taxation treaty.  

What I would like is advice on the wording in the white space. At the moment I have something like "the foreign income on page ... is from an Inherited IRA, which based on articles 17 and 18 of the US-UK tax treaty is regarded as pension income taxable in the UK."  Is this enough or is more detail required?

Also, do I need to say anything about gains inside the IRA (capital gains and dividends) even though electing into the treaty means that these are not tax liable?  Or is it enough to just disclose the existence of the IRA for the HMRC to allow the gains inside it to accrue?

Thanks very much if anyone has any advice.

Someone with much more knowledge will come along with a good answer on how to report the distribution as I am not yet back in the UK but am very interested in your question on wording.

I am pretty sure however that you do not need to report cap gains and dividends within the IRA. Like the IRS, HMRC are not interested on what happens within any pension wrapper, like an IRA, since all the gains and losses will be taxed as regular income once distributions are made.  (One of the disadvantages of holding equities in an IRA is that cap gains and stock dividends eventually get treated as regular income)

Dividends and gains etc within the IRA are not taxable in the US or the UK so no need to worry about them at all. Withdrawals will be taxable as income and if you are an NRA and a UK resident you can claim exemption from US tax. So you should file a W-8BEN to claim the treaty exemption from US tax and have the IRA income sent to you with no tax withheld.

I'm sure there is very formal and professional language that could go in the "white space" and you might want to get a bit more specific about the paragraphs in the Articles that you are relying on, but the gist of what you say sounds ok to me. You might also want to describe the income as "pension income" and spell out IRA as a "Individual Retirement Account" so that HMRC understands this is not earned income.

Out of interest as an NRA was/is there any difficulty managing your IRA or opening up new accounts? Today it's basically impossible to open a financial account in the US without a US address so what happens to the inherited IRA of an NRA?

So much of the initial work on a return by a tax authority is put on computer these days, with little 'human' interaction.

The folks at HMRC, although not the instant knowledgeable people of days gone by, are still pretty good at finding a solution to a question. You may have to ask to speak to a supervisor, but a call to HMRC may establish 1) reporting requirements for your situation, 2) if needed, how and where to report on the SA form, and if needed, 3) what to write in box 19 (page TR 7).

A call to the HMRC help line will now get you the voice interactive answering function, so key words may be 'international income' or 'pension'.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323603/hs211.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323798/hs344.pdf

Thanks for your replies.

I agree with nun that being clearer with the terminology I use in the white space (specifying "pension income" and "Individual Retirement Account") will be helpful.  I will look over the treaty articles to see if I can add details about the relevant paragraphs like you suggest. 

Thank you for the links guya.  The last paragraph is an interesting example of the HMRC specifying what sort of information they like to see: "if you are exempt under a DTA, the DTA that applies. You should also confirm that the scheme has been accepted by Pension Schemes Services as corresponding, or, in the case of the UK/USA DTA, confirm that the US scheme is of a type specified in the Exchange of Notes of 24 July 2001 as being a pension scheme under Article 3.1(o)."

This makes me think that it will also be helpful to refer to the Double Taxation Relief Manual DT19876A which gives explicit guidance on IRAs.  newcomer link: http://www.hmrc.gov.uk/manuals/dtmanual/dt19876a.htm [nonactive]

Nun, there was a fair amount of admin involved in setting up the Inherited IRA, but once that was taken care of there wasn't really that much extra difficulty.

This makes me think that it will also be helpful to refer to the Double Taxation Relief Manual DT19876A which gives explicit guidance on IRAs.  http://www.hmrc.gov.uk/manuals/dtmanual/dt19876a.htm

Thanks for posting that link, with the paragraph on lump sums which states;

The new provision prevents this occurring by providing that a lump-sum payment derived by a resident of one State from a pension scheme established in the other State shall be taxable only in that other State.

Don't stress too much about the wording.

You will claim US tax exemption by filing the W-8BEN and referencing your NRA status and Article 17(1) of the treaty.

HMRC will only tax 90% of your IRA income as it's a foreign pension. You actually don't need to bother with Article 17 on the HMRC side of things as the IRA income is just taxed as a foreign pension. Just make sure you say something to the effect that the IRA is a pension under the US/UK DTA and that gains are exempt from UK tax under Article 18(1).

Agree with all of the main points above. I'd also recommend that in the explanation you write in the "other information" box, make sure you maintain a clear distinction between pension income you receive (taxable) and growth/income earned entirely within your IRA (not taxable). I once had an SA return rejected because HMRC misinterpreted the language that I used - it was sorted in the end without too much hassle, but just ensure your wording is clear and easy to understand on this point.

Thanks so much for all your replies.
I have a much clearer idea of what to write now, and I will follow your suggestions.