Can we have a discount?

We have acquired an elderly client with dual United Kingdom/United States nationality. She returned to live permanently in the United Kingdom about three years ago. Among her various sources of income is a United States social security pension of about $20 000 per annum.

For United States tax purposes this is heavily discounted by 75 per cent; the previous accountants reported this discounted amount on her 2001-02 United Kingdom tax return. We are doubtful that this is correct and believe that the pension is fully taxable in the United Kingdo

However given our client’s dual nationality would Article 19(2) of the United States/United Kingdom double taxation agreement have any bearing on the matter i.e. that the pension might only be taxable in the United States of America?

Readers’ observations would be welcome.

(Query T16 231) -...