I don’t want to alarm people unnecessarily, but I did want to flag this particular pensions tax risk issue up, in case it could affect anyone on SF (hopefully not). This post is only aimed at people who:-
are receiving certain types of UK pension (see below);
were previously long term residents of the UK;
moved to France/are French resident;
and are considering permanently returning to the UK, on or before the 5th anniversary of their arrival.
If you are in that specific scenario, please be aware there is a (frankly vicious) piece of UK legislation that retrospectively taxes you on pensions you have already drawn down (ie pensions in flexible access withdrawal) and on certain lump sums, when you return to the UK. It arises in connection with what HMRC regards as ‘temporary non residence’.
The guidance specifically says the fact that there may have been exemption from UK tax under the tax treaty in respect of the pension payments is irrelevant (in the case of temporary non residents). The guidance is also silent (absurdly to my mind) on whether the UK would even permit you to offset/credit French tax you have correctly paid on those pensions. You’d hope common sense, pragmatism and UK domestic tax legislation would prevent this potential double tax injustice arising.
The legislation fortunately does not cover pensions other than those in flexible drawdown, (and some fairly niche types of pensions) and ‘only’ applies to certain types of lump sum (see guidance in link below). It also does not apply if sums received from those pensions in the non resident period are less than £100,000.
If you are unfortunately likely to be in this position, (which, confusingly, can include certain dual residents) and can’t change the timing of your return to the UK (really? pls think again!!!) , you are very strongly recommended to seek professional advice from a specialist who is fully familiar with this specific issue. For what I hope are understandable and obvious reasons, I am not personally in a position to advise. It is not new legislation, but it’s relatively little known, possibly even amongst some tax advisers, and at least being forewarned is forearmed. There is some planning that can mitigate the likelihood of a charge, but DONT RETURN ‘EARLY’ TO THE UK if humanly possible seems to be the best approach.
For those wanting more information, here is HMRC’s guidance on the issue.
Of course there are other tax considerations to review if you return within 5 years to the UK, such as potential exposure to capital gains tax.