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TonyTax
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Hello. Is tax due on a lump sum death benefit received by a

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Hello. Is tax due on a lump sum death benefit received by a widow (myself) from the foreign employer of my late husband?
He was a foreign national, died in his home country, never took British Citizenship, spent much of his working life in a variety of countries on behalf of said employer, lived in company flats, his salary/tax always handled in his home country, never paid UK tax.

He was supporting me financially even though we had separated (unofficially) whilst living abroad. I returned to live in UK some years before he died.

There was no inheritance tax due as estate absorbed by months of hospital/hospice/care costs and funeral, all in his home country.

Thank you.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

Most payments of this kind paid by UK pension funds are not taxed on the named recipient of the lump sum.

Take a look under the heading "Tax on death benefits from a workplace pension" here for the circumstances when there may be a tax charge on a lump sum paid in the UK.

If you look at page 1 of HS346 here, you will see that there can only be UK tax charge if any of the pension contributions made after 6 April 2006 by your late husband or on his behalf or by his employer were given tax relief in the UK or part or all of the pension fund was transferred to the foreign pension fund from a UK pension fund or from another foreign pension fund where contributions were given UK tax relief, after 6 April 2006.

Given what you have told me, I doubt that the lump sum will have fallen foul of the rules set out in the previous paragraph but you might check with the pension fund administrators to be absolutely sure.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.

Hello again. This lump sum was paid out in my late husband's home country.


 


I had to travel there and, with the help of his niece to translate, attend his company to fill in their required paperwork, then open a new bank account in that country in preparation for the payment.


His niece then arranged for the bank to transfer the funds directly into my UK account two months later when the company made the payment.


 


Does this change your answer as given above?

Expert:  TonyTax replied 3 years ago.
None of that changes my answer.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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