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TaxRobin
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I have a US state pension, a UK state pension, a UK private

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I have a US state pension, a UK state pension, a UK private pension, and an IRA based in the states. I want to bring the IRA to the UK what is the most tax efficient way of doing that?
Submitted: 3 years ago.
Category: Tax
Expert:  TaxRobin replied 3 years ago.
Hello,
You are correct that the double taxation agreement per the tax treaty reduces your resident country tax (UK).
The US tax will be applied and there is no reducing that. You will be taxed on any distribution from the IRA. Lumpsum distributions would not be taxable to you in the UK but the US does not allow for a claim of nonresidency and paying no tax on the IRA distribution.
Under the old Agreement, a lump-sum payment from a pension scheme was taxable only in the country of residence. So if an individual moved from the US to the UK before receiving a lump sum from a US pension scheme, they would be taxable on the lump sum neither in the US (because of the treaty) nor in the UK (which does not tax lump sums anyway).
The new provision prevents this occurring by providing that a lump-sum payment derived by a resident of one State(UK) from a pension scheme established in the other State(US) shall be taxable only in that other State(US).
Article 17 in the new Agreement is a fairly standard pensions article, which provides for the taxation of pensions and other similar remuneration only in the state of residence of the beneficial owner. But there are two provisions that have generated particular interest. The new Agreement applies from 1st January 2004 for US taxes and 6th April 2003 for UK Income Tax.

Paragraph 1(a) sets out the general rule above. For this purpose, a payment is treated as a pension or other similar remuneration if it is a payment under a pension scheme, as defined at Article 3(1)(o).

The best way for the IRA may be to cash it out and pay no tax in the UK.
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Customer: replied 3 years ago.

Thanks for the answer. If I cash out the IRA this would obviously exceed the 25% of the funds I would normally be allowed in the UK. Are you saying that this does not apply, as all UK tax on an IRA is exempt?

Expert:  TaxRobin replied 3 years ago.
Besides the 25% annual you have the 25% of your remaining unused lifetime allowance (based around the normal £1.25 million lifetime allowance).
Customer: replied 3 years ago.

Thanks for the answer, I wasn't sure about the annual and lifetime, my eyes glaze over when I read too much civil service speak. I guess I've got to concentrate on minimising my US taxes, maybe take the IRA over a couple of years. Thanks again. Kind regards John

Expert:  TaxRobin replied 3 years ago.
You are most welcome.
I know what you mean and dealing with the implications of the 2 countries doe snot make your situation any easier.

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