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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a question regarding UK State & overseas pensions.

Customer Question

Hi, I have a question regarding UK State & overseas pensions.
I have a pension from another country that I am receiving in that country
Afterwards I cam to the UK and worked last 15 yrs
I am now applying (claiming) a UK state pension.
I want to know what happens now as I wish to keep both pensions separate ?
I also want to know will this affect my future UK pension (higher or lower) ?
I know there is a Intl Treaty between these two countries to prevent double taxation
So basically will it be the same as I had no Overseas pension, or better or worse for me financially ? Thank you
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.
Which country do you come from originally?
Customer: replied 2 years ago.
Hi, I have dual citizenship. British by birth (born in London) lived in Serbia.
Expert:  TonyTax replied 2 years ago.
Thanks.
Leave this with me while I draft my answer.
Customer: replied 2 years ago.
OK, do you need any more details or my question was clear ?
Expert:  TonyTax replied 2 years ago.
I should be fine. I'm drafting my answer now.
Expert:  TonyTax replied 2 years ago.
Hi again.
As you will see at the link below the original UK/Yugoslavia tax treaty remains in force for Serbia.
http://www.hmrc.gov.uk/manuals/dtmanual/dt20650.htm
The tax treaty is here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/412491/serbia-uk-double-taxation.pdf
Article 18 deals with pensions. If you are resident in the UK, your Serbian pension is taxable in the UK subject to a 10% discount applied to most foreign pensions paid to UK residents. However, if you look at paragraph 2(a), it says that a pension paid by a Contracting State (Serbia), ie the government of that country or a local authority will be taxable only in Serbia. These are known as government service pensions. If you worked for a private company, this paragraph will not apply to you and your pension will be taxable in the UK.
A series of major changes to the UK state pension system are underway in the UK. Even if you were on a very high occupational or private pension, it would not reduce the amount of state pension that you will get. Your state pension is based on your NI contribution record.
If you have a very low occupational or private pension and the amount of state pension that you would be entitled to meant your total income was below a certain level, you might qualify for pension credit to top your income up to a minimum level based on whether you are single of married. Take a look at the notes starting at the link below and use the pension credit calculator to see if you will be eligible for a top up to your state pension entitlement.
https://www.gov.uk/pension-credit/overview
You may be able to get a State Pension statement from the link here:
https://www.gov.uk/state-pension-statement
I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Yes, I'm aware of this treaty (and article 18) but was never able to open it (even when I entered the code for Windows)
Regarding paragraph 2(a) - I worked for one of the biggest state owned companies - JAT (then called Yugoslav Airlines) now Serbia Airlines. It was certainly not a private company, so does that mean I fall under these 'Government Service pensions?
Also, regardless where I fall under, is this treaty (Double taxation) which both countries signed, not devised exactly for that purpose. So that one and the same income (i.e. Serbian pension) cannot be taxed twice ? Once in Serbia and again in Britain (90%) And vice versa for the future British pension to be taxed in Serbia & Britain?
Please clarify
I'll look into the pension credit calculator asap - Thanks
Expert:  TonyTax replied 2 years ago.
A double tax treaty does serve to prevent double taxing of one source of income but the country that it is taxed in is usually dictated by the country of residence of the recipient of the income. However, because different countries have different rules, you can have some types of income taxed in both countries (property income for example) but the tax paid in the country of origin will be offset against the tax assessed in the recipient's country. So, you may tax in one country or both but if that is the case the offset rule ensures that tax paid in the country of origin of the income is credited against the tax in the country of residence of the recipient.
I don't know whether the JAT airline pension will count as a government service pension so you will need to ask the pension payer or the Serb tax office. I'd be surprised if HMRC in the UK know.
Your UK state pension cannot be taxed in Serbia unless you are tax resident there. If you were tax resident in Serbia, you would unlikely be tax resident in the UK at the same time and your UK state pension would be taxed in Serbia alone.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Ok I see it's complicated . Worst case scenario I'm looking at being taxed on both sides on both pensions 90% hoping that the 2 sides will level it out or else I ll have to ask for ' Intl. Tax relief ' ? ?
Thank you
Expert:  TonyTax replied 2 years ago.
Thanks. You aren't looking at paying tax in both countries on the Serb pension. If it is a "government service" pension, the you pay tax in Serbia only. If its isn't a "government service" pension, then it will be taxable in the UK only.
Customer: replied 2 years ago.
I see, I misread you before . Thanks for correcting me.
What about the UK pension when I get it
Will it be taxable only in the UK?
Kind regards
Expert:  TonyTax replied 2 years ago.
The UK State Pension will be taxable in whichever country you are resident in.
Customer: replied 2 years ago.
Hi Tony, it was late last night so I stopped writing
In the meantime I found out that my pension in Serbia is not a govern. service pension, so that means (according too your previous email ) that it will be taxable in the UK only. So how is this executed, I mean up to now Serbia was deducting for tax
Now that I will claim UK state pension does that mean the two countries correspond and the UK takes over ? (or I got it wrong again)
Finally, what happens if I have an 'overlap' for a few months i.e. started working in the UK while still employed in Serbia ?
(because we waited nearly 6 months for our pension resolution)
Thanks
Expert:  TonyTax replied 2 years ago.
The state pension is taxable income but it is paid gross. There will be no way for HMRC to issue a tax code on your Serb pension unlerss the company has a UK base and payroll function in the UK which I doubt. You will, therefore, probably need to register for self-assessment and pay the tax annually. That is, unless you have a UK PAYE income source which is large enough to collect tax on your Serb pension. If I were you, I'd call the tax office on the number here and ask them what they think the best way forward is. You can always come back to me to let me know what they say so I can tell you what I think.
Expert:  TonyTax replied 2 years ago.
The state pension is taxable income but it is paid gross. There will be no way for HMRC to issue a tax code on your Serb pension unlerss the company has a UK base and payroll function in the UK which I doubt. You will, therefore, probably need to register for self-assessment and pay the tax annually. That is, unless you have a UK PAYE income source which is large enough to collect tax on your Serb pension. If I were you, I'd call the tax office on the number here and ask them what they think the best way forward is. You can always come back to me to let me know what they say so I can tell you what I think.
Customer: replied 2 years ago.
OK, I'll try this number and let you know
Can you let me know regarding my query - if I have an 'overlap' for a few months i.e. started working in the UK while still employed in Serbia ?
Thanks
Expert:  TonyTax replied 2 years ago.
How far back was this? You say you came to the UK 15 years ago.
Customer: replied 2 years ago.
Yes , actually the Pension service sent me a forecast in July / 2011 saying : up to 05/April / 2011 - I have 12 qualifying years
So I reckon now I have approx. 16 qualifying years (always been employed)
So that would mean I started working end of 1999 in UK. Now I got my Serbian pension resolution sometime beginning of 2001 in Serbia
So we're saying approx. a year and a half overlapping
Expert:  TonyTax replied 2 years ago.
If you have been resident in the UK since 1999, you should have beeen paying UK tax on your Serb pension since it started in 2001. As you appear to have paid Serb tax, incorrectly in my opinion, its not as if you haven't paid tax and I would let sleeping dogs lie if I were you. That will be difficult since you will need to pay some tax if your total income exceeds the personal allowance which is £10,600 for 2015/16.
Customer: replied 2 years ago.
You mean it would be less complicated when claiming to just omit the ' have you worked in another country ' part ?
Expert:  TonyTax replied 2 years ago.
That will be difficult as the pension is a Serb one.
Customer: replied 2 years ago.
BTW - I tried entering another bonus but I get a sign saying ' you already sent a bonus ' (which I did last night )Regarding your reply; why does it matter from what country the pension is from if I omit my previous history ?
I just want to claim for the last 16 years that I worked in the UK and (as you said let sleeping dogs lie) I would prefer not to implicate my past. That money's not coming in the UK anyway (its approx 200 Euros monthly)
Expert:  TonyTax replied 2 years ago.
When you came back to the UK, you became tax resident and that means that unless you are non-UK domiciled (not British by birth), you are taxable on your worldwide income so HMRC should have been informed of the Serb pension when you started to draw it.
Customer: replied 2 years ago.
So ' as a UK resident you're liable to pay tax on all worldly incomes ' even if it was already deducted in that country?Also when I came here and started working, there was no mention in any contracts ' have you worked before overseas or are you on a foreign pension. ? I had no idea about this. Who was supposed to let HMRC know ? employee or employer ?
Expert:  TonyTax replied 2 years ago.
It's the taxpayer's responsibility to inform HMRC of anything which may affect their UK tax liability.
You should not have paid Serb tax on your Serb pension when it started as you were resident in the UK by then. As you would not have had a P45 from a previous employer when you started your job in the UK, you should have been asked to complete a P46 but your pension had not started at that time. If it had, you would put an X in box C. Here is the old P46:
https://www.dur.ac.uk/resources/jobs/apply/p46.pdf
If HMRC ask about the Serb pension when you call, tell them that you have paid Serb tax to date.
Customer: replied 2 years ago.
Thanks. Just to clarify:
there is only one question which asks if you worked abroad (for people who are accumulating years to get a UK pension)
If I confirm there are boxes for country and dates (so I opened the door). If I decline I just move on.
What's best for me to do considering my situation ?
Expert:  TonyTax replied 2 years ago.
I cannot tell you what to do I'm afraid. You are dealing with the DWP. They won't necessarily pass on your details to HMRC.
Customer: replied 2 years ago.
I understand.
I spoke to HMRC (to ask about applying) 2, 3 weeks ago. After he told me what docs I need, he asked me if I worked abroad
and where was I born. I said - born in London. He than said - Oh Ok, no problem. So it seemed OK, or maybe he flagged it ?
Expert:  TonyTax replied 2 years ago.
So you didn't tell him that you worked abroad? The DWP will see the gap in your NI record and may ask about it. If I were in your position, I would answer all questions honestly. If you are asked if you worked abroad, then you ought to say that you did.
Customer: replied 2 years ago.
Of course, I didn't submit my claim yet. We left off that I can do it by phone or online (that was just a brief discussion)One last thing, you said before - ' If HMRC ask about the Serb pension , tell them that you have paid Serb tax to date '.
How do I prove it (if necessary) ? and did you mean paid in Serbia or UK ?
Expert:  TonyTax replied 2 years ago.
You've told me that you paid tax in Serbia on the pension even though you haven't lived there for 16 years or so. As far as proving it is concerned, the pension payslips or year end statements will do that if any were issued. If they weren't, then you would need to contact the Serb tax office.
Customer: replied 2 years ago.
Yes, that's what I said. In Serbia tax is automatically deducted from pension
regardless where you live
Expert:  TonyTax replied 2 years ago.
If I lived abroad and had a UK pension, tax would be deducted unless I told HMRC that I was no long resident in the UK so that they could issue an NT (No Tax) code to the pension payer. Given what is said in the tax treaty, you would need to do the same as far as your Serb pension is concerned.
Customer: replied 2 years ago.
OK, I'll inquire how to go about this (although I seem to recall checking with the Serb Intl tax office a couple of years ago)
They had no idea what I was talking about
If I do get an NT, will that cover me for the past years ?
Expert:  TonyTax replied 2 years ago.
You will need to get a no tax code from the Serb tax office to be used against your pension. I have had no dealings with them so I cannot comment on how they work.

Theoretically, you should not have been paying Serb tax since the pension started in 2001 and you should have been paying UK tax but I think you will have trouble getting the Serb tax office to repay all that tax. In the UK, you can only go back four years to have wrongs rectified.