Should I file tax - I've never lived in the US and I have no assets in the US

At least in MY case....I do plan to be a permanent resident of the UK.....unless my wife gets fed up with this weather up north....and tromping through the mud with the dogs.....and decides to go back to the US. Not likely.

Don't forget that if the OP remains a US citizen US tax will still be due.....so as a US/UK dual citizen resident in the UK a US Government pension is taxable in both the US and the UK.

I think we're back to the point where we differ.  I think a government pension is taxable exclusively in source or residence country.  But of course it's only my reading of it.

This was an interpretation of the articles....and on this it depends on whether the grammar is correct. I underlined and. Big difference if it is or

Pensions paid to retired civilian and military employees of a Government of either State are intended to be covered under paragraph 2. When benefits paid by a State in respect of services rendered to that State or a subdivision or authority are in the form of social security benefits, however, those payments are covered by paragraph 2 of Article 17 (Pensions, Social Security, Annuities, Alimony, and Child Support). The result will differ depending upon whether Article 17 or 19 applies, since social security benefits are generally taxable exclusively by the residence country while government pensions are generally taxable exclusively by the source country. The result will be the same only when the payment is made to a resident and national of the other Contracting State. In such a case, government pensions, like social security payments, are taxable only in the residence country.

This was an interpretation of the articles....and on this it depends on whether the grammar is correct. I underlined and. Big difference if it is or

Pensions paid to retired civilian and military employees of a Government of either State are intended to be covered under paragraph 2. When benefits paid by a State in respect of services rendered to that State or a subdivision or authority are in the form of social security benefits, however, those payments are covered by paragraph 2 of Article 17 (Pensions, Social Security, Annuities, Alimony, and Child Support). The result will differ depending upon whether Article 17 or 19 applies, since social security benefits are generally taxable exclusively by the residence country while government pensions are generally taxable exclusively by the source country. The result will be the same only when the payment is made to a resident and national of the other Contracting State. In such a case, government pensions, like social security payments, are taxable only in the residence country.

The grammar is correct.  The point on which nun and I differ is whether that applies if the person is a US citizen.  See Article 1.4 (the Saving Clause) and Article 1.5 (exceptions to the Saving Clause), also IRS Publication 901 under Government Pensions - UK.

By the way, don't be alarmed about possibly being taxed twice on your pension.  If need be, as I understand it, you should be able to escape double taxation through judicious application of tax credits and/or "re-sourcing".  Someone please correct me if I'm wrong.

By the way, don't be alarmed about possibly being taxed twice on your pension.  If need be, as I understand it, you should be able to escape double taxation through judicious application of tax credits and/or "re-sourcing".  Someone please correct me if I'm wrong.

That's kind of the way I already knew it to be. A retired accountant friend of mine said he thought it was a like-for-like tax credit. If I understood him correctly, if I paid £1,000 of UK tax for something that I was already taxed on in the US I would get all of that money back when doing the US taxes the next year. When I grilled him on this.....in particular on whether I would just be able to "write off" the equivalent $ amount like I would if I installed new double pane windows (which would only give me back a small portion of the total cost)....he seemed sure I would get ALL of the money back.

The grammar is correct.  The point on which nun and I differ is whether that applies if the person is a US citizen.  See Article 1.4 (the Saving Clause) and Article 1.5 (exceptions to the Saving Clause), also IRS Publication 901 under Government Pensions - UK.

The US always applies the saving clause and if the person getting the pension is a US citizen Article 1.5.b says that you don't get to apply Article 19 at all and you get taxed by the IRS as usual. Whether HMRC will tax the pension depends on whether they actually apply the savings clause  or if they do, how they then define "permanent residence".....would that be ILR?

FYI I emailed this question to the HMRC international enquiry web portal.


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how they then define "permanent residence".....would that be ILR?

FYI I emailed this question to the HMRC international enquiry web portal.

Oh damn......I just assumed since I was living here the majority of 2015 (16 April to 31 Dec) that I was considered permanent. ILR is still over 4 years away for me. But I wouldn't mind having that decision on what is Permanent.

Is it easy to put questions to the HMRC?

Whether HMRC will tax the pension depends on whether they actually apply the savings clause  or if they do, how they then define "permanent residence".....would that be ILR?

FYI I emailed this question to the HMRC international enquiry web portal.

Can I ask how you phrased the question?   

Can I ask how you phrased the question?   

Well I can't remember exactly, but I asked if HMRC would tax a US Government pension when paid to a US citizen when they are permanently resident in the UK and would someone need ILR to be classed as a permanent UK resident?  I also referenced Article 1.5.b and Article 19 and asked that the answer specifically cover the application of both to the situation described.

Well I can't remember exactly, but I asked if HMRC would tax a US Government pension when paid to a US citizen when they are permanently resident in the UK and would someone need ILR to be classed as a permanent UK resident?  I also referenced Article 1.5.b and Article 19 and asked that the answer specifically cover the application of both to the situation described.

Be interesting to see what they say.  (A virtual fiver says they'll assume you're hoping to claim UK tax credit and they'll tell you that you can't because the pension's exempt.    )

That's kind of the way I already knew it to be. A retired accountant friend of mine said he thought it was a like-for-like tax credit. If I understood him correctly, if I paid £1,000 of UK tax for something that I was already taxed on in the US I would get all of that money back when doing the US taxes the next year. When I grilled him on this.....in particular on whether I would just be able to "write off" the equivalent $ amount like I would if I installed new double pane windows (which would only give me back a small portion of the total cost)....he seemed sure I would get ALL of the money back.

Provided you have enough FTCs.  Due to the UK Personal Tax Allowance you might have nowhere near enough FTCs to wipe out the US tax demand.  In which case, as I understand it, the treaty lets you "re-source" the income.  I didn't bother reading that Article in the Treaty, and now thank the lord I'll never need to, so I'll leave it to someone who knows how it works to explain.   

Question for Nun.

You said:

I have no idea how HMRC assesses residency in this situation or whether it even bothers to apply the saving clause.

I said:

I've puzzled over that.  I think (hypothesize) they probably do, where primary taxing right depends on residence.

My hypothesis was way off the mark. 

"HS304 Non residents - relief under Double Taxation Agreements (2015)" (https://www.gov.uk/government/publications/non-residents-relief-under-double-taxation-agreements-hs304-self-assessment-helpsheet/hs304-non-residents-relief-under-double-taxation-agreements-2015) explains.

If you were resident for tax purposes in a country other than the UK, and you want to claim relief from UK tax, under the terms of a DTA between the UK and that other country, as a resident of that country then you need to get a certificate from the overseas tax authority. You must state on the certificate that you are resident there for tax purposes for the period in question.

unless you're a US citizen, in which case:

Article 4(2) of the Double Taxation Convention (DTC) provides that a citizen or green card holder will be treated as a resident of the USA for purposes of the DTA, and thereby entitled to treaty benefits, if the following 2 conditions are met:

they must have a substantial presence (see ‘Substantial presence test’ below), permanent home or habitual abode in the US
they mustn’t be treated as a resident of a state other than the UK under any treaty between the UK and a third state

To me this seems to say that in the case of
 - a US pension paid by the USG (so the US has source taxing rights)
-  to a UK resident who is a US citizen (but not a UK national) and doesn't meet the substantial presence test,
-the US has primary taxing rights as source and the UK will not tax.

In the case of
 - a US pension paid by the USG (so the US has source taxing rights)
-  to a UK resident who is a US citizen and also a UK national,
-the UK has primary taxing rights and the taxpayer will need to claim US FTCs or possibly can file a form requesting that the withholding be discontinued.

In the case of
- a US pension not paid by the USG (so the US does not have primary taxing rights)
-to a UK resident who is a US citizen and doesn't meet the substantial presence test,
- the UK has primary taxing rights and will tax, and the recipient must claim FTCs from the US.

Do you agree?

In the case of
- a US pension not paid by the USG (so the US does not have primary taxing rights)
-to a UK resident who is a US citizen and doesn't meet the substantial presence test,
- the UK has primary taxing rights and will tax, and the recipient must claim FTCs from the US.

Do you agree?

For this situation the UK will tax the pension. The US pension should be resourced by treaty to the UK so that FTCs can be claimed on the US tax return.

For this situation the UK will tax the pension. The US pension should be resourced by treaty to the UK so that FTCs can be claimed on the US tax return.

So, as I said above, except that claiming the US FTCs requires re-sourcing?