# lump sum tax



## rdhudson

I am planning my pensions and I have a question on lump sum distributions The us uk tax treaty is clear in that if you have a lump sum payment on a us pension paid in the uk then you are liable for tax.My case is somewhat different.Prior to moving to the us I worked and accrued a pension in the uk.I did not move this pension to the us. Thus as I see it we have a us resident with a uk sourced pension which would only be subject to uk tax and since this is alump sum th liability is zero. Am I correct?


----------



## robnw

There's debate and different advisers come to different conclusions following their own research, but we think .the lump sum (unlike the pension) is subject to the savings clause, and therefore is taxable in the US (assuming you are a USC). There are ways to reduce this bill.


----------



## Bevdeforges

robnw said:


> There's debate and different advisers come to different conclusions following their own research, but we think .the lump sum (unlike the pension) is subject to the savings clause, and therefore is taxable in the US (assuming you are a USC). There are ways to reduce this bill.


Taxable in the US, yes, I'd agree. But wouldn't it be taxable only on the increase over any contributions the retiree had made his or herself? (I.e. only taxable on any gain over and above what you'd paid in toward the pension)

(Admittedly, I have no idea how pensions in the UK work so if there is no employee contribution, then nevermind...)
Cheers,
Bev


----------



## rdhudson

Thank you for your replies, so I wont take the chance and take down the lump sum, but I do wish that when the governments write this stuff they covered the topic properly and just didn't rely on using fear and trepidation to get their way. If you read paragraph 2 of Article 17 of the treaty then it's ambiguous.

Notwithstanding the provisions of paragraph 1 of this Article, a lump-sum
payment derived from a pension scheme established in a Contracting State and
beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State.

As I read that my pension was established in a contracting state (in this case the UK)
and is held by me as a resident in the other contracting state ( US) and is only taxable in the first state (the UK)


----------



## CapnBilly

Robnw's reply says 'assuming you are a USC ( US citizen)'. I'm not clear from your profile that you are, so your interpretation of the DTA may be correct.


----------



## rdhudson

Yes I have dual nationality and pay tx in both in the us and uk. My residency is USA


----------

