RPSM13101020 - Technical Pages: International: Migrant member relief: Relief for individuals

Relief for individuals

Before 6 April 2006 relief for members of overseas pension schemes was subject to "corresponding relief" requirements. Relief was dependent on where the individual was domiciled, where their employer was tax resident, and where their scheme was established, as well as on the scheme being accepted as corresponding to a UK approved pension scheme. This is no longer the case after 5 April 2006 under the migrant member relief provisions.

Under Schedule 33 a number of conditions have to be met by the individual and by the overseas pension scheme if the individual is to qualify for migrant member relief on contributions made by them or on their behalf. The individual must be a relevant migrant member (see RPSM13101040) and must meet three other conditions (see RPSM13101050). The overseas pension scheme has to be a qualifying overseas pension scheme (see RPSM13101060) before the individual claims relief on their contributions to it. The scheme does not have to be a qualifying overseas pension scheme when the contributions are made but it must be an overseas pension scheme (see RPSM13101070).

Schedule 33 provides that a relevant migrant member of a qualifying overseas pension scheme who meets the specified conditions is entitled to relief on contributions paid by them or on their behalf to that scheme under section 188 (RPSM05100020). That is subject to section 190 (see RPSM05101120) so each individual has an overall limit on relief in a tax year that takes into account not only any UK tax-relieved contributions they make to overseas pension schemes but also any contributions they make to registered pension schemes.

The maximum amount of an individual's relieved contributions is 100% of their relevant UK earnings which are chargeable to income tax for the tax year or, if greater, the basic amount of £3,600. However, the basic amount only applies if relief is given at source. Within that overall annual limit an individual can make contributions to a qualifying overseas pension scheme in the form of the transfer of certain shares under section 195 (see RPSM05101040).

An individual can only obtain migrant member relief by making a claim in accordance with section 194. Relief cannot be given at source or under the net pay arrangements as sections 191 to 193 do not apply.

In addition, relevant migrant members of a qualifying overseas pension scheme are relieved on any contribution made in respect of them by their employer to that scheme. Such an individual is entitled under section 308A Income Tax (Earnings and Pensions) Act (ITEPA) 2003 to exemption from an income tax charge under section 62 ITEPA if money's worth is provided to the individual by their employer's contribution (that is where the payment meets the employee's monetary liability). The individual is also protected by section 307 ITEPA from an income tax charge under Chapter 10 Part 3 ITEPA on a death or retirement benefit provided by an employer.

Individuals who received “corresponding relief" on contributions made in the 2005-2006 tax year but who are not entitled to migrant member relief, for example because they are not UK resident, can receive transitional corresponding relief in subsequent tax years (see RPSM13101100). An individual can receive migrant member relief or transitional corresponding relief if they are also contributing to a UK registered pension scheme.