IRAs - again

I am becoming increasingly uncomfortable/confused regarding how IRAs are supposed to be taxed for those of us that are US citizens and UK resident.  I read the recent thread regarding inherited IRAs and then the various responses from HMRC on their forum and this whole idea of IRAs as not being pensions, and further, that they are taxed as interest has confounded me🤯
 
So, just to try to get a starting point on whether what I thought I understood is still true, could I please get the opinions of those here on the following:

1. IRA to ROTH conversions - I was under the impression these are not UK taxable and it would appear from an HMRC response on their forum not even reportable (although we always have).  Do we believe it matters whether conversions are the entire IRA balance, or not, from a taxation perspective? (This is getting at the whole lump sum versus periodic issue).

2. IRA RMDs (non-ROTH) - taxable UK, not taxable USA, if US tax withheld a FTCR should be claimed for the UK tax paid. Correct? I assume this means one would need to time tax returns and payments such that the uk tax has been paid prior to submitting the US tax return.

3. Reporting of IRA RMDs (non-ROTH) on self assessment. This brings up the whole ‘interest versus foreign income’ issue. I am entirely confused regarding how HMRC says they treat IRAs.  If they are not to be treated as pensions, but as savings accounts, why wouldn’t we be required to report annual interest and dividends generated?   But no, according to HMRC we should only report when distributions are taken, and then report these as ‘interest’?  Also, reading the HMRC forum some of their responses seem to imply you report the entire distribution as interest whilst others seem to suggest it’s only the gain that you would report as interest (although I have zero idea how I’d calculate that, the original contributions were decades ago, into various personal IRAs and 401k plans).  I’m so confused here I’m not even sure what my question is😂.   My gut feel is to report as foreign income because that makes logical sense to me, what are others going to do?

I am similarly baffled by HMRC's answers on their forum.   In particular the treatment of IRAs as pensions and withdrawals as interest.  So as a starting point, I wouldn't believe anything they say on that forum.  Furthermore, the technical notes on the DTA that @Swiss_Danny linked to in his thread, specifically mention individual retirement accounts as pensions - although they don't mention Individual Retirement Accounts, unless they're going to argue that capitalisation is significant they are the same thing.

I'm afraid the only real answer is to argue the point with HMRC, quote to them their own documents and get a response in writing.  Failing that, get a free consultation with one of the big name tax experts.

I am becoming increasingly uncomfortable/confused regarding how IRAs are supposed to be taxed for those of us that are US citizens and UK resident.  I read the recent thread regarding inherited IRAs and then the various responses from HMRC on their forum and this whole idea of IRAs as not being pensions, and further, that they are taxed as interest has confounded me🤯
 
So, just to try to get a starting point on whether what I thought I understood is still true, could I please get the opinions of those here on the following:

1. IRA to ROTH conversions - I was under the impression these are not UK taxable and it would appear from an HMRC response on their forum not even reportable (although we always have).  Do we believe it matters whether conversions are the entire IRA balance, or not, from a taxation perspective? (This is getting at the whole lump sum versus periodic issue).

2. IRA RMDs (non-ROTH) - taxable UK, not taxable USA, if US tax withheld a FTCR should be claimed for the UK tax paid. Correct? I assume this means one would need to time tax returns and payments such that the uk tax has been paid prior to submitting the US tax return.

3. Reporting of IRA RMDs (non-ROTH) on self assessment. This brings up the whole ‘interest versus foreign income’ issue. I am entirely confused regarding how HMRC says they treat IRAs.  If they are not to be treated as pensions, but as savings accounts, why wouldn’t we be required to report annual interest and dividends generated?   But no, according to HMRC we should only report when distributions are taken, and then report these as ‘interest’?  Also, reading the HMRC forum some of their responses seem to imply you report the entire distribution as interest whilst others seem to suggest it’s only the gain that you would report as interest (although I have zero idea how I’d calculate that, the original contributions were decades ago, into various personal IRAs and 401k plans).  I’m so confused here I’m not even sure what my question is😂.   My gut feel is to report as foreign income because that makes logical sense to me, what are others going to do?

I only have experience with 1 - Roth conversions. I made several IRA to Roth conversions after moving back to the UK, as did my wife. In each case it was a single lump sum once per every other year until our IRAs were completely converted to Roths. In each case it was declared on our HMRC return but no HMRC tax paid, tax paid only to the IRS.

2. Will not be an issue for us as we are all Roth.

3. Interest or dividends sounds wrong to me, I think it is taxed as regular foreign income or pension. Dividends are taxed at a lower value because it is actually taxing income that has already been taxed, as companies pay dividends out of their after-tax profits.
My regular US pensions are recorded and taxed by HMRC as foreign pensions.  For those taking RMDs from non-deductible IRAs the 1099-R will show how much is a return of contributions and how much is to be taxed. HMRC should only tax the taxable amount shown on the 1099-R.

There's seldom a single answer in matters like this, but any way you do your taxes has to be defensible. For UK tax your domicile and residency are going to be important factors, less so for the US because of the US citizen basis for taxation.

The UK tax exempt status of IRA to ROTH conversions relies on the lump sum exemption in the treaty, but infamously the "lump sum" is not defined in the treaty and so there is some interpretation. Maybe remittance might have been away to avoid UK tax for some, but the rules have changed so that needs to be looked at again. Also the Savings Clause allows the UK to tax it's residents irrespective of the treaty in all but a few special circumstances, but I think it's policy for HMRC not to do that.

If/when I return to the UK I will be declaring any TIRA distributions as foreign pension income and citing the relevant treaty section. I'll also use the treaty for capital gains, dividends and interest taxes. For ROTH distributions I'll probably let HRRC that some were made and tell them there is no UK tax due and take the treaty position.