Glossary · Cross-Border
Saving Clause
The saving clause in the US–UK tax treaty preserves the US right to tax its citizens and residents as if much of the treaty did not exist. It is why being American limits many treaty benefits that would otherwise reduce US tax.
In more detail
Most US tax treaties contain a saving clause stating the US may tax its citizens and residents on worldwide income regardless of the treaty, subject to specific exceptions. In practice this means a US citizen in the UK often cannot use treaty provisions to escape US tax on items the treaty would otherwise assign to the UK — the citizenship-based US tax system reaches through. Exceptions exist, and claiming them typically requires disclosure on Form 8833.
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