Although, as a rule, persons who are residents of a contracting state are entitled to treaty benefits, exceptionally, a contracting state may reserve the right to tax its own residents despite the terms of a treaty. The US-UK Treaty (2001) reserves this right on the following terms:

‘1(4) Notwithstanding any provision of this Convention except paragraph 5 of this Article, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if this Convention had not come into effect.’

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