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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Income tax on foreign pensions: last 22 years I have

Resolved Question:

Income tax on foreign pensions: For the last 22 years I have had a pension from the World Bank in Washington DC. I believe that 10% of it should be exempt from UK tax, based on the following text, gleaned from the Internet:
Taxable pension income
Section 575 (as amended by IT(TOI)A 2005) provides that the taxable amount of a foreign pension is 90% of the actual amount arising in the tax year unless the income is charged in accordance with Section 832 of IT(TOI)A (relevant foreign income charged on the remittance basis). As foreign pensions are treated as “relevant foreign income”, Chapters 2, 3 and 4 of Part 8 IT(TOI)A respectively provide for claims to remittance basis, deductions and reliefs and unremittable income. These Chapters contain the rules that formerly applied to Case V of Schedule D. See IM1580 for further details.
IM1580 - Cases IV & V: arising basis: pensions and annuities
Unless ICTA88/S19 (1) 4 applies, a taxpayer's right to receive a pension or annuity from abroad is a `possession out of the United Kingdom' and the pension or annuity is income arising from that possession chargeable under Case V of Schedule D.
A deduction of one-tenth is to be made in charging pensions or annuities on the arising basis. Where the remittance basis applies, however, the one-tenth deduction is not due and the amount chargeable is the amount of the pension or annuity which is received in the United Kingdom in the basis year for the year of assessment.
HMRC have never allowed me this exemption - Who is correct here?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you.
Expert:  TonyTax replied 1 year ago.
I see no reason why your World Bank pension should not qualify for the 10% deduction for UK tax purposes unless you are non-UK domiciled and you use the remittance basis of assessment. I'm assuming that the pension is paid without deduction of UK tax and that you report it to HMRC in an annual self-assessment tax return. It should be reported on page F2 of the SA106 foreign pages and the figure you should report should be 90% of the gross pension. See page FN7 of the notes here. HMRC will assume that the figure you report is net of the relief as they have no third party confirmation of the pension. The only thing you can do is to make a claim for overpayment relief by letter. You need to claim within four years of the end of the tax year to which the claim relates and HMRc may not accept a claim where the opportunity existed to amend a self-assessment tax return. I hope this helps but let me know if you have any further questions.
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