New Remittance Rules

Hello all,

Let's say we chose, for mathematical reasons, to not claim the remittance basis, and allow the UK to tax us on all of our worldwide income.

If the income is say interest in a US bank, then this interest has already been taxed in the US.  Will the UK give us a tax credit for this tax paid?  And if so, how in holy hell do you calculate the US tax paid, when the US tax calculations, with deductions and adjustments, make it nearly impossible to associate the tax paid with the interest earned.

Paul

No - my understanding is that the UK will not give credit because of the way that HMRC interpret the interest Article in the Double Tax Convention, so the issue does not arise. 

Lovely...

No - my understanding is that the UK will not give credit because of the way that HMRC interpret the interest Article in the Double Tax Convention, so the issue does not arise.

Is that the whole story? Isn't it the case that under the terms of Article 11 of the DTA the tax paid in the US should be reduced to 0%?

That is the way that the DTA stops double taxation on such income.

John - you are correct if a treaty position is taken under Article 24 on the US return & - of course - providing the saving clause is not in point.

As you have possibly heard, there is zero certainty as yet if the IRS will accept such resourcing claims for 2008 following the change effective from 6 April 2008.

psweeney may wish to seek professional advice from a UK & US dual qualified tax adviser to arrive at the optimum position for her/his circumstances.

Anyone wanting to read the UK-US DTA can do so on this HMRC webpage.

Article 11(1) reads :-

Interest derived and beneficially owned by a resident of the United Kingdom shall be exempt from tax by the United States.

-: and Article 11(2) reads the exact converse of that .... not unexpectedly given the nature of a DTA.

So as regards a UK resident the US interest is "exempt from tax by the United States", and it therefore should follow that if any tax has been deducted from that US interest, such tax should be refunded.

providing the saving clause is not in point

Yes of course, subject to the "small print" in the DTA.

I don't think the saving clause is small print - seeing that it ensures that US citizens remain fully taxable in any case - so overides almost all other clauses in the treaty.