Expat returning to UK. Where to get advice?

badger09

Trying to help my son through a very stressful period.

He left UK to live & work in Hong Kong 2012. HK tax resident since then & has Permanent Residence status (don't know if that's relevant)
Employed by multinational Investment Management Co, initially as employee of UK arm, later transferred to HK arm. 
Pension built up over 16 years employment with them now held in HK.

Due to ill health he resigned at end of 2021 and is returning to UK this month.

While employed, his pension was invested is said company's funds, available only to current employees, so employer has converted pension to cash.
Under HK tax rules apparently, on leaving HK, he can simply cash in & withdraw his pensions. He has done that with the much smaller HK equivalent to our State Pension.

I'm hoping it is possible to transfer the bigger combined UK/HK pension into a SIPP once he is back in UK.

Can anyone point me in the direction of who to approach for advice on this? Specialist pension adviser? Specialist tax advisor? IFA? 


Thanks in advance

PS
He also has 2 preserved pensions in UK from previous UK employments and the aim is to gather all together in a SIPP..

sandsy

Will he be working in the UK or will his ill-health prevent that?

It sounds like the HK pension funds are paid out as a tax free lump sum and are therefore completely out of any pension system. The gross amounts he will be able to contribute to a SIPP will be limited by his income each year, or limited to £3600 gross if he has no income.

Are the previous UK pensions defined benefit or defined contribution?

QrizB

badger09 said:

Under HK tax rules apparently, on leaving HK, he can simply cash in & withdraw his pensions. He has done that with the much smaller HK equivalent to our State Pension.

If this is true, I'm not sure why he'd want to transfer them into a SIPP where he'll be taxed when he withdraws them.

He could be better off with an ISA (and GIA for anything over the annual ISA limit, at least until enough years pass for him to shuffle it across).

xylophone

2 preserved pensions in UK from previous UK employments 

Are these Defined Benefit occupational pensions?

If so, what is the value of the benefits?

xylophone

And how old is your son?

Has he checked his UK state pension?

https://www.gov.uk/international-pension-centre

https://www.gov.uk/check-state-pension

badger09

sandsy said:

Will he be working in the UK or will his ill-health prevent that?

It sounds like the HK pension funds are paid out as a tax free lump sum and are therefore completely out of any pension system. The gross amounts he will be able to contribute to a SIPP will be limited by his income each year, or limited to £3600 gross if he has no income.

Are the previous UK pensions defined benefit or defined contribution?

He won’t be working for the foreseeable future. Possibly some part time work later but he won’t be earning anywhere near his previously well paid job. 

I know future SIPP contributions will be limited to £3600pa. 

Both preserved pensions are DC. 

QrizB said:

badger09 said:

Under HK tax rules apparently, on leaving HK, he can simply cash in & withdraw his pensions. He has done that with the much smaller HK equivalent to our State Pension.

If this is true, I'm not sure why he'd want to transfer them into a SIPP where he'll be taxed when he withdraws them.

He could be better off with an ISA (and GIA for anything over the annual ISA limit, at least until enough years pass for him to shuffle it across

He can cash in HK pension now or after his return to UK, but it would be easier to do it while he’s still there. 

He didn’t want to make a rushed expensive mistake, and despite being ex HMRC, this isn’t my area & I'm out of my depth. 

Maybe you’re right & I'm being blinded by the lure of ‘no tax payable within the UK SIPP wrapper’. Once invested, he could draw down enough to use his annual personal allowance. 

He will open an S&S ISA & GIA when he gets back.  He also has substantial cash savings so it will take him a very long time to 

shift those & the HK pension pot into S&S (& SIPP). 

xylophone said:

2 preserved pensions in UK from previous UK employments 

Are these Defined Benefit occupational pensions?

If so, what is the value of the benefits?

xylophone said:

And how old is your son?

Has he checked his UK state pension?

https://www.gov.uk/international-pension-centre

https://www.gov.uk/check-state-pension

@xylophone
As above, they are both DC pensions. 

He is 45. 

I’ll get him to check his state pension forecast. He has been paying vol NIC while in HK. 

Joey_Soap

OP needs to ensure all payments from HK are settled and in the bank before arriving back in the UK. If the pension lump sums are received after arriving back in the UK, there's going to be a UK tax liability on the HK pension lump sums. I am pretty sure that'll be the case. I had the same situation myself a few years ago.

bostonerimus

Joey_Soap said:

OP needs to ensure all payments from HK are settled and in the bank before arriving back in the UK. If the pension lump sums are received after arriving back in the UK, there's going to be a UK tax liability on the HK pension lump sums. I am pretty sure that'll be the case. I had the same situation myself a few years ago.

Article 17 of the UK-HK tax treaty says that

"ARTICLE 17 Pensions Pensions and other similar remuneration (including a lump sum payment) arising in a Contracting Party and paid to a resident of the other Contracting Party in consideration of past employment or self-employment and social security pensions shall be taxable only in the first-mentioned Party. "

So there would be no UK tax due on an HK pension paid to a UK resident. If the HK pension lump sum is received while still an HK resident then there is only HK tax to deal with and also no UK tax issues. You won't be able to put money into a SIPP above the minimum amount for a non-worker because the HK pension money is unearned income. You could put it into an ISA though.

Joey_Soap

bostonerimus said:

Joey_Soap said:

OP needs to ensure all payments from HK are settled and in the bank before arriving back in the UK. If the pension lump sums are received after arriving back in the UK, there's going to be a UK tax liability on the HK pension lump sums. I am pretty sure that'll be the case. I had the same situation myself a few years ago.

Article 17 of the UK-HK tax treaty says that

"ARTICLE 17 Pensions Pensions and other similar remuneration (including a lump sum payment) arising in a Contracting Party and paid to a resident of the other Contracting Party in consideration of past employment or self-employment and social security pensions shall be taxable only in the first-mentioned Party. "

So there would be no UK tax due on an HK pension paid to a UK resident. If the HK pension lump sum is received while still an HK resident then there is only HK tax to deal with and also no UK tax issues. You won't be able to put money into a SIPP above the minimum amount for a non-worker because the HK pension money is unearned income. You could put it into an ISA though.

If only it were that simple. Things changed in 2017. Like from the UK government guidelines "From 6 April 2017 lump sums paid by non-UK pension schemes to UK residents will be taxable regardless of the type of pension scheme paying the lump sum. However the taxing provision and the taxable amount will depend on the nature of the scheme making the lump sum payment."

OP needs to read and understand -

https://www.gov.uk/government/publications/pension-tax-for-overseas-pensions/pension-tax-for-overseas-pensions

Question is - Which carries more weight in the UK? The UK law or an international treaty?

Myself, by managing my return to the UK I managed to avoid the 2017 changes. The OP needs to very careful he doesn't land himself with a very large unexpected tax bill here in the UK.

badger09

@bostonerimus @Joey_Soap

Thanks both. I knew it would be a minefield. I’ll do some more reading today. 

Joey_Soap

badger09 said:

@bostonerimus @Joey_Soap

Thanks both. I knew it would be a minefield. I’ll do some more reading today. 

A little bit more....... When your son returns, he will have to complete 2022/23 tax return after 5th April 2023. I know things are hard presently, but you must keep scrupulous records. Your son should be able to apply for split year UK tax treatment for this year to segregate HK and UK income into HK taxed and UK taxed pots. Ideally, your son needs to get all finances closed out and final whilst he is still in HK and employed. If he returns to the UK and is not a HK employee but is still receiving income of any kind from HK it's going to have to be reported in his 22/23 tax return. That includes any pension income or lump sums. In an ideal world his return would have been planned and any potential liability to UK could have been avoided. Perhaps there's still time. On the UK/HK dual tax treaty, it basically means the same income won't be fully taxed twice if there is a UK liability arising. I hope you can plan your son's return and avoid the complications that all too easily arise in these circumstances. I took over a year planning my return to the UK in 2020 after working overseas. Good luck.