Taxation of US IRA's in the UK

[kmr1809]

I am UK resident and citizen, but lived in the USA in the 80's and while working there opened a standard Individual Retirement Account (IRA). Having passed 59 1/2 years old I have taken a lump sum payment cheque for $50,000 from Fidelity, the provider; I have not closed the account and there is still about $35k left in it. I filed a W8 BEN form with Fidelity and have therefore not paid any US tax.

First question, I have seen some older forum posts which say that because this is a lump sum, I may not have to pay UK tax; is this true? If so, do I have to put this information on my UK tax return?

Second question relates to if I have to pay tax on the amount. I paid the cheque into my UK bank account and was told that it would take 8 weeks to clear. The cheque was written on Feb 2, I paid it into my bank on Feb 18. If it takes 8 weeks to clear it will clear sometime in mid-April. If I do have to pay tax, do I have to include the amount in this year's tax return, 2013/14, i.e. when I received and paid in the cheque, or in next year's return, when the amount will be credited to my account? The reason I'm anxious to know is that the date will determine when and how much I invest in VCT's to reduce the tax burden

[DavidTreitel]

The first question is whether you have elected into the treaty. If you have not then you simply sold some investments to release some cash.

The next question is whether this is taxable if you have elected into the treaty. If it is an LSD it is taxable under the treaty in the US; if it is not it is taxable in the UK. I would suggest that if you are electing into the treaty that 90% of the payment is taxable in the UK - assuming the treaty route produces the lowest tax.

[kmr1809]

Hi, thank you very much for your reply. As I am not aware of electing into the Treaty then I assume I'm not covered by it.

[Colin61]

Hi,
i have a similar question which I think fits under this heading.

My IRA and a 401k have been untouched for many years with dividends etc being automatically reinvested. My understanding is that such reinvestments did not need to be notified to HMRC.

As I have now reached 59 1/2 I will be withdrawing funds from these account

If I understand the above thread correctly, as I have not elected into the treaty then the withdrawal is not taxable under UK?

If this is correct, how should HMRC be proactively informed of these withdrawals ?

[Lambs]

C,

If you don't get any replies, it may be better to start a fresh thread.

Regards,

Lambs