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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: United States of America: Relief from double taxation from 2003: US Citizens and Other income

The new UK/USA Agreement applies from 1st and 6th April 2003 respectively for the purposes of UK CT and IT

US Citizens resident in the UK

A major change from the old agreement in Article 24(6)(b) provides that the UK will not provide relief for the US tax imposed on its citizens resident in the UK, if that tax is solely charged in accordance with the “saving clause” in Article 1(4). As a consequence, Article 24(6)(c) eliminates the potential for double taxation that can arise by providing that the US will credit the income tax paid or accrued to the United Kingdom, after the application of Article 24(6)(b). It further provides that in allowing the credit, the US will not reduce its tax below the amount that is taken into account in the U K in applying Article 24(6)(b). This will mean, for instance:

that the UK will no longer give relief for US tax paid in respect of US work days by US citizens, working for UK employers. Rather, the US will give relief for UK tax;

that US citizens will be able to claim a exemption under Article 1 4(2) in the same way as a UK resident who is not a US citizen can providing that all the requirements set out in the paragraph are fulfilled.

Any case of doubt or difficulty should be submitted to Employment Income Technical.

No credit to be given for third country income

Article 24(6)(a) provides that the United Kingdom is not required to give credit for United States tax charged on a United States national who is resident in the United Kingdom in respect of income which he derives from sources outside the United States as determined under United Kingdom laws.