I thought that I would expand on the comments made by Guya -with which I agree- about the taxation of the US interest.
My analysis is-
• Article 11 of the double tax treaty deals with interest income. If it applied, it would give exclusive taxing rights to the state of the residence of the recipient, which in this case is the UK.
• Moggy32 is a US citizen, and therefore the savings clause of the treaty in Article 1(4) applies, entitling the US to tax moggy32. The exceptions listed in Article 1(5) do not include Article 11. The interest has a US source and the US has the right to tax it.
• Article 24(6) deals with relief from double taxation. Article 24(6)(b) says that the UK is to give credit for US tax on US source income, but only to the extent that the US may impose tax on someone who is a UK resident but not on a US citizen. Under Article 11, as above, the US would not impose any tax. Therefore, the UK does not need to give any credit for US tax on the US interest.