Expat returning to UK. Where to get advice?

badger09

Thanks for the recent comments. 

My son will submit his 2021/22 UK tax return after he has taken professional advice. 

I think some of the HK pension lump sum must relate to work done in UK, for the same employer, before he went to HK in 2012. 

At the moment, our priority is him being well enough to fly back later this month. The tax situation will have to wait. 

Joey_Soap

badger09 said:

Thanks for the recent comments. 

My son will submit his 2021/22 UK tax return after he has taken professional advice. 

I think some of the HK pension lump sum must relate to work done in UK, for the same employer, before he went to HK in 2012. 

At the moment, our priority is him being well enough to fly back later this month. The tax situation will have to wait. 

Absolutely, I wish you all the best. Health always comes first, I believe your son will improve markedly once he's back with his family. Best regards and good luck for the future.

Joey_Soap

bostonerimus said:

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. 

And in your situation, that's absolutely correct. Done the same thing myself. You have a regular, normal expat situation. So did I.

I have already tried to explain why the OP situation is far different from your situation. In fact it's very unusual and going to be complex to sort out.

Out of respect for the OP, I believe have said everything I can to try to assist so I won't post again here. Unless the OP requests.

nigelbb

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.

Each Double Tax Treaty is individual although they all follow the OECD template. The one that I have experience of is the UK-France DTT. Income from employment is only ever taxed in the country where the work is physically undertaken. Government service pensions & rental income are taxed in the country of origin while other pensions including state pension are taxed in the country of residence. Once income is taxed in one state it is not taxable in the other so there is no question of one state having a higher marginal rate of income tax & taking another bite of income tax as in your example. Capital Gains Tax on the other hand is implemented like that.