Relief for individuals on contributions to an overseas pension
scheme under a double taxation agreement (DTA) is generally given
on the same basis as on contributions to a UK tax- recognised
pension scheme. So as a consequence of the introduction of pension
tax simplification the way in which tax relief under a DTA is
calculated in 2006/07 and subsequent years is different from that
applying in earlier tax years.
If the conditions for UK tax relief specified in a particular
DTA are met a member of an overseas pension scheme is entitled to
relief on the contributions they make to that scheme as if section
188 applied (
RPSM05100020). The relief is subject
to the rules in section 190 (see
RPSM05101120) so that each
individual has an overall limit on relief in a tax year. This limit
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 does not apply where relief
is not given at source. Within that overall annual limit an
individual can make contributions to an overseas pension scheme in
the form of the transfer of certain shares under section 195 (in
the same way that certain share transfer can be made to UK
registered schemes see
RPSM05101040.
Relevant UK earnings are treated as not being chargeable to
income tax if, in accordance with a DTA, they are not taxable in
the United Kingdom. Earnings will not be taxable where the DTA
gives sole taxing rights on earnings to the other country. This
differs from the situation where the DTA provides for credit to be
given for tax paid to the other country on earnings – in such
circumstances the UK has secondary taxing rights.
An individual can only obtain tax relief under a DTA by
making a claim. That is in line with migrant member relief which
cannot be given at source or under a net pay arrangement.
In addition, employees will not be liable to income tax on
contributions made to an overseas pension scheme on their behalf by
their employer. Such contributions qualify for relief as if section
308 Income Tax (Earnings and Pensions) Act (ITEPA) 2003 applied to
exempt the employee from an income tax charge.
| Glossary ( RPSM20000000) |
