looking for an "HMRC worldwide disclosure for dummies" guide

I took a lump sum pension payout from a US pension in late 2017. A couple months ago I got a letter from HMRC about needing to disclose. I sent the acknowledgement back and registered at the worldwide disclosure site. I've started filling it in and got to the point where I'm supposed to fill in amounts. What do I need to do at this point? I've got the 1040NR showing that I paid taxes on the lump sum. Do I need to do a 2016/2017 self assessment and file the foreign income/tax relief bits?

I took a lump sum pension payout from a US pension in late 2017. A couple months ago I got a letter from HMRC about needing to disclose. I sent the acknowledgement back and registered at the worldwide disclosure site. I've started filling it in and got to the point where I'm supposed to fill in amounts. What do I need to do at this point? I've got the 1040NR showing that I paid taxes on the lump sum. Do I need to do a 2016/2017 self assessment and file the foreign income/tax relief bits?

1. Did you complete, sign and return to HMRC their “Certificate of Tax Position” form that would have been attached to an HMRC offshore campaign letter?

2. On what basis do you believe today there is any irregularity in your UK tax position? Are you certain it relates to this specific pension distribution?

3. How you are defining "lump-sum"? Was it a complete distribution in a single calendar year? Were there - ever - any other distributions from this plan?

4. From a US perspective, did you pay tax on the entire distribution at 30%; on the entire distribution at graduated US tax rates - or did you divide the distribution between contributions and growth to ascertain how to report the distribution to the IRS?

The appropriate starting point is to consider how the lump sum from the US pension scheme should have been taxed.

The lump sum was paid in late 2017. Was KentF a UK resident in the UK tax year 2017/18? Is KentF a US citizen, and not say a UK citizen who earned US pension rights while working in the US.

Armed with the above facts, the analysis should consider the terms of the UK US double tax treaty as they apply to these facts, in particular Article 17(1)(b).

To answer guya's questions:
1. yes
2. The irregularity would be that I didn't report the income at the time
3. It was a complete distribution, no other distributions
4. I received US form 1042-S showing 30% was withheld

Some further information - I was born in the US and lived there until 1995. I accumulated this pension while working at Boeing between 1988 - 1993. I moved to the UK in 1995, naturalized in 2001, and renounced US citizenship in around 2015.

Given that HMRCs nudge campaign has no statutory authority; you are probably very rare in signing HMRCs “Certificate of Tax Position” form.  It sounds probable that the US tax position for both 2015 and 2017 may need to be corrected.  It is unclear what HMRCs information related to; but I would start from the premise that it may not be the lump sum distribution.  Given that by signing the non-statutory certificate you have put yourself in a worrying place I would suggest taking professional advice.

Background information
The key additional facts are firstly KentF is not a US citizen and secondly he took all his pension rights as a single lump sum.

Order of analysis
The logical order is to consider matters under the following three areas-
•   Liability under US domestic rules.
•   Liability under UK domestic rules.
•   The position under the UK US double tax treaty.

US domestic rules
It is evident that the US has applied a 30% withholding tax on the payment. I do not know if this represents the final liability; others may be able to comment on this.

UK domestic rules
The full amount of the lump sum is not taxable in the UK. The technical position is complex because of various changes to the relevant provisions. There are various examples at EIM15326 which give a flavour of the application of the rules. KentF should consider taking professional advice, if the DTR relief rules do not provide relief from UK tax.

UK US double tax treaty
As KentF is not a US citizen, the “full” provisions of the treaty should be considered, and not the reduced provisions that apply to US citizens.

The relevant rules are set out in Article 17-
•   Article 17(1)(a) gives a general rule that pension benefits should be taxed only in the state of residence of the payee, which would be the UK.
•   Article 17(1)(b) gives a first modification to the above general rule. As relevant to KentF, this provides that any amount which would have been exempt from US tax in the hands of a US resident is to be tax exempt in the UK. I do not know if this has any relevance, as it would depend on an understanding of the US rules.
•   Article 17(2) gives a second modification to the general rule. As relevant to KentF, it says that a lump sum payment is taxable only in the US and not in the UK. The treaty does not give any definition of a lump sum payment but this would appear to cover the entire commutation of pension rights.
In summary, Article 17(2) would appear to provide that the UK has no taxing rights.

Overall
Overall, the double tax treaty and UK domestic rules should provide that the lump sum is either largely or entirely exempt from UK tax.

Perhaps in due course KentF would share the outcome of matters.

The UK changed the rules on taxation of lump sums a couple of years back - read this: https://www.gov.uk/tax-on-pension/tax-free for more info. The treaty article is now out of date w/r/t UK tax.