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Consequences of tax treaty tie-breaker test.
My client is a US citizen who splits his time between the US and the UK. Under the statutory residence test he is a UK resident but under the tie-breaker rule in the UK/US double tax treaty he falls to be treated as a US resident. I am not clear on the UK tax consequences of being a US resident under the treaty. HMRC’s International Manual says: ‘Although the agreement overrides some of the normal consequences of being a UK resident it does not in the case of an individual override the fact of UK residence itself for purely domestic law purposes’ (see tinyurl.com/y9wteadm).
As an example my client has some UK bank interest. The double tax treaty would indicate that the US has exclusive taxing rights so the interest is not taxable...
