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Where Taxpayers and Advisers Meet

taxation of income from a USA IRA distribution

Colin61
Posts:32
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:32
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:271
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:32
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.


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