This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

taxation of income from a USA IRA distribution

Colin61
Posts: 6
Joined: Sun Dec 31, 2017 3:53 pm

taxation of income from a USA IRA distribution

Postby Colin61 » Mon Sep 30, 2019 4:51 pm

Hi,
in 2018-9 UK tax year, I took a £A distribution from a USA IRA.
Despite the UK-USA tax treaty, the company withheld £B tax for the IRS.
I subsequently completed a 2018 USA tax return and the tax was refunded to me in the 2019-20 UK tax year.


When completing my 2018-9 UK tax return, do I enter A-B as my income and that no tax was withheld ( as it was eventually repaid).
Then enter £B as income in my 2019-20 UK tax return?

Best regards,

Colin61
Posts: 6
Joined: Sun Dec 31, 2017 3:53 pm

Re: taxation of income from a USA IRA distribution

Postby Colin61 » Tue Oct 01, 2019 12:18 pm

I have just had a very productive call with HMRC.

For my situation described above, I need to enter the GROSS amount in my 18-9 tax year ( irrespective that the refund actually came through in 19-20 tax year)

Hope this is useful to others.

DavidTreitel
Posts: 221
Joined: Thu Aug 16, 2012 4:31 pm

Re: taxation of income from a USA IRA distribution

Postby DavidTreitel » Tue Oct 01, 2019 7:02 pm

Assuming you are electing to treat the IRA as a pension plan, the UK has the primary right to charge tax on the gross distribution. Withholding tax is not a final tax and is not creditable in the UK.

Colin61
Posts: 6
Joined: Sun Dec 31, 2017 3:53 pm

Re: taxation of income from a USA IRA distribution

Postby Colin61 » Thu Oct 03, 2019 7:35 pm

Assuming you are electing to treat the IRA as a pension plan, the UK has the primary right to charge tax on the gross distribution. Withholding tax is not a final tax and is not creditable in the UK.
Thanks David, the distribution will be taxed in UK under the USA/UK treaty; the IRS taxes have been fully refunded. Unfortunately, it appears that each distribution will have IRS tax withheld which I then need to claim back by submitting a tax return.


Return to “Income Tax”