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HMRC internal manual

Double Taxation Relief Manual

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Double Taxation Relief Manual: Guidance by country: United States of America: Pensions: US Social Security Act

Old Agreement: Applies to US tax up to 31st December 2003, UK income tax up to 5th April 2003

Pensions payable under the United States Social Security Act are not paid in consideration of past employment and did not therefore come within Article 18 (Pensions). Instead, they were within Article 22 (Other income) and were taxable only in the country of which the recipient was a resident.

Pensions paid by the United States government to former members of the US armed forces (or to their surviving spouses or dependent children) in respect of their period of service were regarded as paid for services rendered to the United States. Such pensions therefore came within Article 19 (Government Service) of the agreement and are exempt from United Kingdom tax unless, exceptionally, the recipient was both a national and a resident of the United Kingdom in which case the pension was taxable only in the United Kingdom.

New Agreement

Article 17(3) now specifically provides for exclusive residence-country taxation of social security benefits. Like the old Agreement it provides that payments made by one of the Contracting States under the provisions of its social security or similar legislation to a resident of the other Contracting State will be taxable only in the other Contracting State. The result is precisely the same as in the old Agreement.

Pensions paid by the United States government to former members of the US armed forces (or to their surviving spouses or dependent children) in respect of their period of service continue to regarded as paid for services rendered to the United States. Such pensions therefore come within Article 19 (Government Service) of the agreement and are exempt from United Kingdom tax unless, exceptionally, the recipient is both a national and a resident of the United Kingdom in which case the pension is taxable only in the United Kingdom