US NRA in UK, UK/US tax on IRA-IRA xfer, Roth Conversion ?

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bluejeansman
Posts: 229
Joined: Sun Oct 19, 2008 6:50 pm

US NRA in UK, UK/US tax on IRA-IRA xfer, Roth Conversion ?

Post by bluejeansman »

[2016 thread bumped in 2021 --admin LadyGeek]

Hi All [ especially US non resident aliens (NRA) in UK ] :

I live in the UK, naturalized British citizen, no US green card, no US citizenship, i.e I am NRA. Still have money in US (taxable and tax-sheltered).

Has anything changed recently with respect to US-UK tax treaty for the following points ?

1) Withholding, W8-BEN etc ? Earlier, I used to file W8-BEN and there used to be 15% withholding on dividends on taxable accounts, and no wothholding on anything else. But are we (NRAs in UK) now supposed to pay 30% tax on everything ? dividends, roth conversion, taking money out of IRA (distribution) after 59 years etc ?

2) Roth Conversion in US (i.e converting from IRA to Roth IRA). Fidelity is claiming 30% withholding. My US tax bracket is low (about 15%), but will get the 15% back if/when I file my US tax return ? At 30% tax, I am not sure I want to do Roth conversion. Also, is there any UK tax due on Roth Conversion ?

For reference : my old thread on this : viewtopic.php?f=2&t=122162

3) US_IRA_A to US_IRA_B asset transfer : In this case I guess I would be asking B to pull the money from A, instead of asking A to wire the money to B. with the wiring approach, it once triggered a 1099-R with a 1 in Box 7 which was treated like a distribution. But anyway, before I digress, my question here is about pure "asset transfer" between US IRA providers which I am pretty sure is not taxable in US. But is this now taxable in UK ?

On another note, I am a chronic procrastinator and I delayed my Roth conversion this year until the last minute. Fidelity said they will withhold 30% so I did not proceed to do the conversion. Altho Vanguard allowed me to do a Roth conversion last week with 0% withholding, they have sent me a mail yesterday as follows : During a review of your tax certification we identified an address on your tax certification or in your account records that is outside of the tax treaty country claimed on the form, or standing instructions to make payments outside of the treaty country, which could indicate that you do not qualify for a reduced rate of withholding. Therefore, we will require additional information in order to meet IRS requirements. Until we receive the documentation described below, your tax status is certified as foreign; however, your tax treaty claim remains invalid. As a result, we are required to withhold federal income tax at a rate of 30% on certain payments. I dont know what the "certain payments" means. I plan to call them, but Vanguard call waiting times runs into hours these days.

Looking forward to receiving a response from some of the UK NRAs here.

Thanks in advance.
Topic Author
bluejeansman
Posts: 229
Joined: Sun Oct 19, 2008 6:50 pm

Re: US NRA in UK, UK/US tax on IRA-IRA xfer, Roth Conversion ?

Post by bluejeansman »

No one from UK on these forums nowadays ?! really appreciate a response if you are an NRA in UK with assets in US. Thanks !!
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: US NRA in UK, UK/US tax on IRA-IRA xfer, Roth Conversion ?

Post by TedSwippet »

bluejeansman wrote:Has anything changed recently with respect to US-UK tax treaty for the following points ?
Not to my knowledge.
bluejeansman wrote:Roth Conversion in US (i.e converting from IRA to Roth IRA). Fidelity is claiming 30% withholding. ... Also, is there any UK tax due on Roth Conversion ?
This thread from another forum indicates that Fidelity in particular seem to be unwilling to fully follow the US/UK treaty. I don't know whether this intransigence is new or if it has always been this way.

I also don't know the answer to whether or not a Roth conversion is UK taxable, but I would dearly like to, since I am investigating whether or not converting my own US retirement accounts will be worthwhile.
bluejeansman wrote:US_IRA_A to US_IRA_B asset transfer ... But is this now taxable in UK ?
Pre-tax to pre-tax? This shouldn't be UK taxable. I'm pretty sure there is a clear statement to that effect somewhere in the technical notes or other supporting doc for the US/UK tax treaty (don't have time just now to look it up, but you can probably find it).
nr8209
Posts: 7
Joined: Sun Apr 04, 2021 8:03 am

Re: US NRA in UK, UK/US tax on IRA-IRA xfer, Roth Conversion ?

Post by nr8209 »

I had the same issue with Fidelity deducting tax at source even with properly completed W8BEN. I got around this by pulling the lot out and putting it into Vanguard. No more withheld tax and feeling smug I decreased Fidelity global holdings by a minuscule amount!
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