Precisely. The original aim of the 'lump sum' clause was to close off a "loophole" whereby the UK traditionally did not tax (foreign?) whole-pension lump sums, and under other clauses neither would the US. Clearly the US couldn't possibly accept this, hence this special 'lump sum' clause. This UK tax loophole is apparently long since closed, but the treaty clause remains.What is the definition of a non-lump sum distribution then?
The following discussion with HMRC is one that covers this area. It is notable for the confusion it generates. HMRC appears to reverse its position several times, cannot accurately address detailed scenarios provided, conflates interest with pension withdrawals, attempts what may be an authoritative reply, and eventually stops addressing the issue entirely:
UK tax implications for 401k pension withdrawal in the US - Community Forum - GOV.UK
HMRC's definition of 'lump sum' and the US's definition of 'lump sum' differ. The individual investor is left in the dark. Either guess, or use a professional to guess for you, with equal likelihood of error.
Statistics: Posted by TedSwippet — Thu Feb 22, 2024 4:56 am — Replies 5 — Views 579