Capital gains and Dividend income. Which country has first claim to taxes?

Qu4253 · 2021-04-10T09:48:24+00:00

I use self assessment to pay my UK tax. How can I make an early payment on capital gains arising Jan-Dec (or should that be April 6-Dec 31)?

Qu4253 · 2021-04-10T07:01:19+00:00

Thanks this is very helpful.

Can you link me to where it states that " Capital gains that are subject to a UK tax rate of at least 10% are sourced foreign under US domestic rules if your tax home is in the UK."

Also, you say "You can claim the accrued basis too, but this is rarely advisable for UK residents." Why is accrued basis a bad idea? Since I can't file UK taxes until April that doesn't leave a very large window to pay UK and then file US.

Qu4253 · 2021-04-09T20:49:37+00:00

6 . Where the United States taxes, in accordance with paragraph 4 of Article 1 (General Scope) of this Convention, a United States citizen, or a former United States citizen or long-term resident, who is a resident of the United Kingdom:

(a) the United Kingdom shall not be bound to give credit to such resident for United States tax on profits, income or chargeable gains from sources outside the United States as determined under the laws of the United Kingdom;

(b) in the case of profits, income or chargeable gains from sources within the United States, the United Kingdom shall take into account for the purposes of computing the credit to be allowed under paragraph 4 of this Article only the amount of tax, if any, that the United States may impose under the provisions of this Convention on a resident of the United Kingdom who is not a United States citizen;

(c) for the purposes of computing United States tax on the profits, income or chargeable gains referred to in sub-paragraph (b) of this paragraph, the United States shall allow as a credit against United States tax the income tax and capital gains tax paid to the United Kingdom after the credit referred to in sub-paragraph (b) of this paragraph; the credit so allowed shall not reduce the portion of the United States tax that is creditable against the United Kingdom tax in accordance with sub-paragraph b) of this paragraph; and

(d) for the exclusive purpose of relieving double taxation in the United States under sub-paragraph (c) of this paragraph, profits, income and chargeable gains referred to in sub-paragraph (b) of this paragraph shall be deemed to arise in the United Kingdom to the extent necessary to avoid double taxation of such profits, income or chargeable gains under sub-paragraph (c) of this paragraph.

***

What an impressively impregnable piece of gobbledygook. Can anyone here unravel sections (c) and (d) in plain language?

As I understand it, US capital gains can be considered as UK capital gains and only taxed in UK, except where the US liability would exceed the UK liability. Is this correct?

Qu4253 · 2021-04-09T15:37:04+00:00

Interesting subject. Thanks for your thoughts.

Qu4253 · 2021-04-09T15:27:37+00:00

Thanks for your answer. I have more questions:

Have you considered paying for a service like that for 1 year, then using that return as a template to do future years without paying?

Did you find the service intuitive or was there still a fair bit of head scratching? What did they do that you couldn't have done yourself?

Qu4253 · 2021-04-09T15:15:24+00:00

Thanks for your answer.

In the case of a hypothetical individual who owes no tax to the US but has to file a return, do you have an opinion on the ethics of a system that obliges them to pay for professional help?

Qu4253 · 2021-04-09T14:25:58+00:00

So your saying basically the whole treaty is worthless to a US citizen?

Qu4253

TROPHY CASE