Tax strategy using US IRA to ROTH rollovers

[nun]

Maybe someone can point out the flaw in my logic.

Consider a UK citizen living in the UK with US 401k and ROTH accounts.

When income is taken from the 401k the UK citizen files a W8-BEN and claims treaty exemption from US income tax. However, the UK citizen actually rolls the 401k money directly into a ROTH and then claims treaty exemption from UK tax under article 18.1 of the treaty. When withdrawals from the ROTH are made there is no tax in the US or the UK.

So is it really possible for a UK citizen to completely avoid tax on 401k, IRA, 403b etc accounts? I had previously believed that tax would be paid in the UK on the rollover from the 401k to the ROTH (as the US sees the rollover as a taxable event), but if 401k to ROTH rollovers are treated as tax free by HMRC under Article 18.1 because it's a rollover to another qualified pension plan, as my research indicates, it looks like a big tax loophole for NRAs living in the UK with US retirement accounts.

[DavidTreitel]

This discussion may help other readers of the Taxation Web forum :
http://talk.uk-yankee.com/index.php?PHP ... ic=80798.0

and this one:
http://www.bogleheads.org/forum/viewtop ... &p=1788084

[nun]

Yep, someone over at bogleheads.org asked the question and my immediate thought was that as a non-covered NRA resident in the UK periodic payments would be only taxable in the UK as long as a treaty claim was made on W-8BEN. If the payment was a lump sum it would only be taxable in the US. After I learned that in this situation IRA to ROTH rollovers are not taxed by HMRC is seemed possible that there is a loop hole.