Overseas pension schemes ― taxable events

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Overseas pension schemes ― taxable events
  • Lifetime allowance
  • Annual allowance
  • Unauthorised payments
  • Foreign tax paid in respect of unauthorised payments
  • Taxable short service refund of contributions
  • Taxable lump sum death benefit payment
  • Trivial commutation, winding-up and uncrystallised funds lump sums
  • Overseas transfer charge

This guidance note provides support for those needing to report taxable events in relation to overseas pension schemes that are not registered in the UK. It provides an overview only, with reference to further research materials. You may need to take specialist advice.

The tax treatment of income from foreign pensions is discussed in the Foreign pension income guidance note.

HMRC guidance on reporting pension savings tax charges, including those arising on overseas pensions, can be found in HMRC Helpsheet HS345.

FA 2007, Schs 3 and 4 made significant changes to the UK taxation of overseas pensions, broadening the application of UK tax to overseas pensions. Most of the changes in this legislation apply from 6 April 2017, but some provisions (for example, the overseas transfer charge below) date from 9 March 2017. See also Simon’s Taxes E7.248, E7.248A and E7.248B.

A UK tax charge might arise in relation to overseas pension savings in arrangements not registered in the UK when the scheme includes ‘UK tax-relieved funds’ or ‘UK transferred funds’. Each of these terms is expanded on below.

UK tax-relieved funds are essentially as they sound ― ie the amount saved into an overseas pension that benefited from UK tax relief or exemption. However, no amounts saved prior to 6 April 2006 are included.

The following are included as UK tax-relieved funds:

  1. •

    member contributions, or those made on the member’s behalf after 5 April 2006 that were relieved or exempted from UK tax

  2. •

    employer contributions made after 5 April 2006 in respect of retirement and death benefits, if the member was exempted from UK income tax on those contributions

FA 2004, Sch 34, para 3(2)

The definition of tax-relieved contributions includes those where relief has been given under:

  1. •

    the ‘migrant member relief’ provisions

  2. •

    double tax arrangements, since 5 April 2006

UK transferred funds are funds in an overseas pension scheme that were transferred directly or indirectly to that scheme on or after 6 April 2006 from a UK registered pension scheme,

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