Expat returning to UK. Where to get advice?

badger09

Joey_Soap said:

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.

Unfortunately, I think its now too late for any meaningful planning. He ceased HK employment at the end of December 2021 and has his flight booked later this month. He really needs to come 'home' and if there are UK tax consequences, so be it.

Your input is much appreciated, thank you. 

Joey_Soap

badger09 said:

Joey_Soap said:

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.

Unfortunately, I think its now too late for any meaningful planning. He ceased HK employment at the end of December 2021 and has his flight booked later this month. He really needs to come 'home' and if there are UK tax consequences, so be it.

Your input is much appreciated, thank you. 

I suspected that might be the case. I wish you all the best for a speedy improvement in your son's health. I am sure once he is back with his family he will feel much better. Since he is no longer employed, he likely now fails the overseas tests in RDR3 for non payment of tax on overseas income. I suggest you Google for the HMRC guidelines and look at the example scenarios, especially the ones relating to split year treatment when returning from overseas employment to the UK. You have plenty of time to plan for filling in the 22/23 self assessment form after 5th April 2023. Your son will have to do that, it's not optional. Given the complicated scenario and the timings, I really believe you are going to need formal advice from a taxation specialist who is familiar with HK/UK tax. Impeccable records are required to make this as easy as possible. Good luck.

Edited to add - I have just reread your post. You need expert advice on tax for the 21/22 tax year too since your son ceased employment in December 2021 which was in the last tax year ended 5th April 2022. I cannot for sure say that your son has no UK tax liability for year 21/22. On the face of it, he fails the RDR3 overseas tests from December 2021. I think it likely he has a UK tax bill coming. You definitely need advice on this. It is going to get very complicated counting days worked and not worked in HK and days in UK. All the best.

bostonerimus

Joey_Soap said:

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.

It would not surprise me if the UK no longer follows it's international treaty obligations, however, the link you posted does not mention the application of any tax treaties. It would be best to arrange the timing of the lump sum pension payment and tax residency status to make UK tax moot, but even if that is not done I would start out by claiming the Article 17 treaty UK tax exemption and explain this on the SA100 page TR7. A quick Google will produce content that shows that HK pension payments and lump sums due to work in HK are only taxable in HK, but it is an area where professional advice is probably appropriate.

https://community.hmrc.gov.uk/customerforums/pt/2f415a95-da39-eb11-8fed-00155d975291#:~:text=Your answer is not to,resident after 5 April 2011.

Joey_Soap

bostonerimus said:

Joey_Soap said:

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.

It would not surprise me if the UK no longer follows it's international treaty obligations, however, the link you posted does not mention the application of any tax treaties. It would be best to arrange the timing of the lump sum pension payment and tax residency status to make UK tax moot, but even if that is not done I would start out by claiming the Article 17 treaty UK tax exemption. A quick Google will produce content that shows that HK pension payments and lump sums due to work in HK are only taxable in HK, but it is an area where professional advice is probably appropriate.

https://community.hmrc.gov.uk/customerforums/pt/2f415a95-da39-eb11-8fed-00155d975291#:~:text=Your answer is not to,resident after 5 April 2011.

Reading his latest posts, the boat has already sailed for the OP's son. It appears the OP has been unemployed since December 2021 but remained overseas. This is a complicated situation where the overseas tests in RDR3 apply. It's going to involve counting days and other complicated stuff such as considering "UK ties". Simply being overseas doesn't mean UK tax isn't payable. In fact, in general terms, the opposite applies. UK tax is due on overseas income unless you meet the requirements of RDR3. Right now, I do not see how the the OP's son meets the overseas tests for the whole of 21/22.

It's more important that the OP's son gets his health back on track. Then he needs to fill in a 21/22 self assessment form, with professional advice. Then he needs to fill in a 22/23 self assessment form after 5th April 2023. Again, I think professional advice will be required and split year treatment claimed. It is not optional, those forms will have to be completed. The clock is ticking on the 21/22 form.

badger09

Thank you thank you both

As I said, despite being retired Inspector of Taxes, I’m flummoxed by the pensions jargon & interaction of HK/UK tax 

I know he has to get professional advice, hence the question in my OP. Who from? Unfortunately, that will have to wait until he gets back. 

Just keeping everything crossed HK doesn’t suspend passenger flights again. I haven’t seen him for over 2 years and some things far more important than money. 

Joey_Soap

badger09 said:

Thank you thank you both

As I said, despite being retired Inspector of Taxes, I’m flummoxed by the pensions jargon & interaction of HK/UK tax 

I know he has to get professional advice, hence the question in my OP. Who from? Unfortunately, that will have to wait until he gets back. 

Just keeping everything crossed HK doesn’t suspend passenger flights again. I haven’t seen him for over 2 years and some things far more important than money. 

Indeed, good luck. I wish your son all the best for the future. I am certain his health will improve once he is back with his family who obviously miss him so much. Very best wishes.

I wish I could recommend a reliable UK/HK tax advisor for you, but I can't. 

Edited to add - In the interim, I highly recommend you to Google and download the HMRC guide notes for RDR3. They are written in fairly plain English and explain split year, automatic overseas test, UK ties and much more. Along with the worked examples it should help understand where you stand from the UK taxation perspective.  Good luck.

xylophone

If you type  Hong Kong/UK Tax Adviser into Google, you will come up with the names of several firms.

For example

https://www.buzzacott.hk/expatriate-tax-uk?gclid=EAIaIQobChMIruHK1arD9wIVArTtCh1NygUVEAAYASAAEgKYJ_D_BwE

You/your son will need to ring round to check on service available and fees.

nigelbb

Joey_Soap said:

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?

The answer is an international treaty overrides UK law. For example with relation to Double Taxation Treaties the HMRC's Statutory Residence Test has a very low threshold for deeming someone tax resident in the UK (in the most extreme case with as few as 16 days resident in the UK) when the other state may also deem them resident so the DTT will provide tiebreakers to determine residence.

Joey_Soap

nigelbb said:

Joey_Soap said:

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?

The answer is an international treaty overrides UK law. For example with relation to Double Taxation Treaties the HMRC's Statutory Residence Test has a very low threshold for deeming someone tax resident in the UK (in the most extreme case with as few as 16 days resident in the UK) when the other state may also deem them resident so the DTT will provide tiebreakers to determine residence.

It isn't an either/or situation though. It is extremely common to be tax resident at the same time in more than one jurisdiction.

Personally, as recently as 17/18 I was tax resident in four jurisdictions. One of which was the UK. And two jurisdictions until year 20/21, when I claimed split year treatment in the UK. The usual effect of a dual tax treaty is that the same money is not subject to the full marginal rate of tax in more than one jurisdiction at a time. At it's simplest for example, let's say overseas income has been taxed at 15% and on your UK self assessment form you declare the overseas income but the UK tax rate is 20%. The dual tax treaty means you owe the UK tax authorities 5% on that income. The dual tax treaty sets out who gets first call on the subject income.

That's very oversimplified to illustrate a point, but it's basically true.

Given the complex situation outlined by the OP, unfortunately, I don't see a way forward without there being some UK tax liability on overseas income for 21/22 and possibly 22/23 as well. But the devil really is in the detail and this is a complex situation. I think the OP has been advised as far as he can be here to be honest.

Now he needs expert professional assistance.

In my humble opinion, OP absolutely needs to file UK tax returns for 21/22 for which the clock is ticking. And 22/23 where a split year treatment request is probably appropriate. There are specific questions on the UK self assessment form regarding overseas income and overseas pensions income/lump sums. They will need to be answered.

bostonerimus

Joey_Soap said:

nigelbb said:

Joey_Soap said:

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?

The answer is an international treaty overrides UK law. For example with relation to Double Taxation Treaties the HMRC's Statutory Residence Test has a very low threshold for deeming someone tax resident in the UK (in the most extreme case with as few as 16 days resident in the UK) when the other state may also deem them resident so the DTT will provide tiebreakers to determine residence.

It isn't an either/or situation though. It is extremely common to be tax resident at the same time in more than one jurisdiction.

Personally, as recently as 17/18 I was tax resident in four jurisdictions. One of which was the UK. And two jurisdictions until year 20/21, when I claimed split year treatment in the UK. The usual effect of a dual tax treaty is that the same money is not subject to the full marginal rate of tax in more than one jurisdiction at a time. At it's simplest for example, let's say overseas income has been taxed at 15% and on your UK self assessment form you declare the overseas income but the UK tax rate is 20%. The dual tax treaty means you owe the UK tax authorities 5% on that income. The dual tax treaty sets out who gets first call on the subject income.

That's very oversimplified to illustrate a point, but it's basically true.

Given the complex situation outlined by the OP, unfortunately, I don't see a way forward without there being some UK tax liability on overseas income for 21/22 and possibly 22/23 as well. But the devil really is in the detail and this is a complex situation. I think the OP has been advised as far as he can be here to be honest.

Now he needs expert professional assistance.

In my humble opinion, OP absolutely needs to file UK tax returns for 21/22 for which the clock is ticking. And 22/23 where a split year treatment request is probably appropriate. There are specific questions on the UK self assessment form regarding overseas income and overseas pensions income/lump sums. They will need to be answered.

The UK-HK DTT is clear that an pension from HK for work done in HK is not taxable in the UK. The OP might have an issue if any part of the pension was due to work done while in the UK, but maybe just prorate the pension, declare the UK portion and explain exactly what you are doing and why on the self assessment form.

If, or when, I return to the UK I won't be including my US Social Security payments on my UK self assessment and foreign income forms because the UK-US DTT makes them only taxable by the US. I will claim exemption under Article 17.3.