UK-US treaty “significant” for pension funds
UK – A new treaty between the UK and US on double taxation has been hailed as a “significant development” for pension funds by HSBC’s actuarial arm.
“This is a significant development for US and UK pension funds,” said John Wilson, research consultant at HSBC Actuaries and Consultants.
Wilson said a key feature of the treaty is that UK employees can remain in UK schemes. He foresaw a “huge sigh of relief” from schemes at the development.
Also important was the elimination a 15% withholding tax paid on income derived from investments in the US. The treaty opened the way for “much simpler and more tax efficient pension provision in respect of secondees between the two countries”.
Article 18 of the treaty means that UK employees seconded to the US will be able to remain a member of a UK scheme without suffering a US tax charge on either benefit accrual or employer contributions.
“Further, they will be able to claim a US tax deduction on their own payments to the scheme,” Wilson adds. “The US employer will also be able to claim a US tax deduction on its contributions to the UK pension scheme.”
The treaty, which replaced a 1975 agreement, came into force at the end of March. According to the UK’s tax authorities, it aims to eliminate the double taxation of income and gains flowing between the UK and the US.
UK paymaster general Dawn Primarolo said: “The new treaty provides significant benefits for businesses, and allows them to invest with certainty and confidence while encouraging more open markets, enterprise and business flexibility."
The United States Council for International Business has applauded the treaty’s “many innovative provisions”.