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bigduckontax, Accountant
Category: Tax
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The individual concerned always was and is UK resident for

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The individual concerned always was and is UK resident for tax purposes. For a time they worked part time in an EU country and was required to contribute to a registered foreign government pension scheme. All income was included on the HMRC tax return. HMRC gave credit for foreign income tax paid (under the double taxation agreement) but, paradoxically, did not allow any tax relief for the pension contributions.It seems clear that the resultant pension pot does not fall under the LTA rules since it arises from taxed income. However, no answer has been received from HMRC as to the tax status of pension payments from this pot, raising the spectre of double taxation.
Submitted: 1 year ago.
Category: Tax
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Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The reason HMRC did not allow the pension contributions probably stems from the fact that as far as the UK is concerned it is not a pension scheme authorized by HMRC. It can thus be liberated to the UK outside the current rules as it represents taxed income albeit saved. This does not reflect any legislation to the contrary in the EU state in which the pension fund is held. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
This is very useful; thank you. Just to confirm then, such payments which come from taxed income should not be returned in the "foreign pension" section of the HMRC annual tax return?
Expert:  bigduckontax replied 1 year ago.
Not quite, my response was based on the conception that you were liberating the pension pot from the relevant EU state. If this pension is paying benefits then indeed they do constitute 'foreign pension' and any tax deducted allowable as a tax credit against UK tax liability on the same income stream under thee Double Taxation Convention. If you are liberating the pot then it does not need to be declared at all. Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 1 year ago.
Please indulge me a little further to be clear I understand. Payments in the EU country from the pension pot appear to be paid free of tax since the individual is tax resident in the UK ( which did not allow tax relief from the contributions to this pension pot). So it could be regarded as a kind of saving scheme. Should HMRC levy income tax on these pension payouts, the owner of the pot will not recover the amounts paid in for perhaps decades.So are these sums returnable as income or part capital ( cf the UK insurance wrapper savings schemes).
Expert:  bigduckontax replied 1 year ago.
If these payment are for a pension which is in issue then they will be foreign income and subject to UK tax less, under the Double Taxation Convention, any tax credits attached .
If they are a s refund of the pension pot then they will escape UK taxation as the fund is unauthorized and effectively just moneys on deposit.
Customer: replied 1 year ago.
OK- many thanks for your patience. It is certainly a tricky area, subject to much miss-interpretation. I suspect HMRC should have checked to see if the fund was ( or was likely to be) authorised since it is a government-based scheme.
Expert:  bigduckontax replied 1 year ago.
I admit it does seem rather a mess. I am surprised that an EU Government pension scheme was not authorized.
Expert:  bigduckontax replied 1 year ago.
Your question has come up again and this post is just to clear my list

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