UK government proposal to remove all Expats tax allowance. You WILL pay more tax!

General Discussion
1

I have discovered that George Osbourne proposes that he will remove all tax allowances for non resident ex-pats. This is likely to take effect from 2015, so not long now. This means that any pensions or earnings you receive from the UK, perhaps renting out a house, will now be subject to taxation from pound one.


I am awaiting my pension, payable from 2017, I was going to leave it there as it's a good pension with a highly trusted blue chip company, should I now consider QROPS?


Those of you that already receive your pensions from the UK will have little or no choice but to pay more tax in the UK unless you have the choice or transferring your tax liability to France. If thousands of people do this the chancellor may actually get back less tax as a result - perhaps an opportunity for a petition!


I have started an online petition, please sign; https://you.38degrees.org.uk/petitions/reconsider-removing-tax-allowances-from-ex-pats

2

Agreed quite so. Fortunately my UK Bank pays my interest gross. But it has to be declared to the French.

3

Yes, but interest is taxable ONLY in the country of residence irrespective of whether you have a tax allowance. It is NOT taxable in UK but IS taxable in France. Banks and Building Societies deduct tax when they shouldn't which is why it can be claimed back. The removal of the tax-free allowance will have no effect on bank interest for us in France. The only effect will be felt by those who have government pensions, such as yourself and my wife, plus those who have UK property from which they receive rental income.

4

Concerning the Bank Interest - Dick - as you know from experience you are correct for France - My informant adds - not all Double Taxation Conventions are so worded and for some countries DTCs do not exist. My consultant was 'globally correct' in her remarks and had observed that the HMRC will refund tax where the particular DTC permits it.

This 'thread' illustrates an important aspect of the whole matter - that the general run of expatriates are no different from citizens in the UK. We are mostly just ordinary folk who want a pleasant stable life and a feeling that our own national government respects us and will help us. The UK tax people ought to be made to understand how ordinary we are and should make rules simple.

I hardly need to point out yet again that we need someone in Westminster to protect our interests and air our needs and concerns. I fear the petition on this winds up this month and one would need to mount a new one if only one could be sure that it would get more than 10,000 signatures to begin with. The apparent apathy of the Brit abroad seems to preclude taking action.

http://epetitions.direct.gov.uk/petitions/55085 This petition was not started by me, but by Sarah Smith, editor of The Connexion.

5

Well that's as it may be Dick but having filled in the tax form sent from the UK tax office it was signed and stamped by the guy at the Hotel des Impots sent to Inland Rev in the UK or what ever they call themselves now i was taken off the UK tax and onto the French system i dont really care how its done the end result is as my income is below the threshold here in France i no longer pay tax, my pension is not a UK gov one but a private company plus my age related

6

Hi Dick -- I admit to puzzlement and am checking this out.

The Double Taxation Convention France/UK says as follows which would indicate that you are correct. If of course one's total UK taxable income for a couple lay below the combined tax threshold of £10k + £10k and the bank paid the interest gross, there is no issue.

ARTICLE 12
INTEREST
(1) Interest arising in a Contracting State and beneficially owned by a
resident of the other Contracting State shall be taxable only in that other
State.
(2) The term "interest" as used in this Article means income from debtclaims
of every kind, whether or not secured by mortgage and whether or
not carrying a right to participate in the debtor's profits, and in particular,
income from Government securities and income from bonds or debentures
as well as all other income assimilated to income from money lent by the
taxation law of the Contracting State in which the income arises. The term
"interest" shall not include any item which is treated as a dividend under the
provisions of Article 11 of this Convention.

7

Margaret,

Use a UK postcode - any one - maybe your last one. It is not checked.

8

But Glen, do NOT get talked into a totally unsuitable QROPS. You are often better off sticking with what you have rather than risking an unsuitale QROPS with all the fees that go with it.

9

Interesting terminology John. You cannot choose where to be taxed - it depends entirely where you are fiscally resident. If you are a permanent fiscal resident in France you HAVE to be taxed here

10

Hello Brian,

According to the Hotel de Impots in Saintes, under the terms of the double taxation agreement with France, bank interest is taxed in France. I pay tax on mine here and reclaim the tax deducted from the bank from HMRC - have done for years. This year they paid it back without a claim from me! Maybe your UK tax consultant is not up to speed with the DTA with France.

I agree on the teachers pension - a credit given on what they think she should have paid even tho' she paid nothing because of the tax-free allowance. Incidentally, I discovered that they had included the state retirement pension in the calculation of her tax code. This meant she was being taxed in the UK on her SRP as well as in France. I challenged this and HMRC agreed with me and excluded it.

11

Hi

Picked up tyhe same topic on DVN . Tried to sign petition but it would not accept our postcode 16480. help

Margaret

12

Hi Dick

I have this information from a tax consultant in England.

----- Tax on UK bank interest is reclaimable from HMRC, if the non-resident person has a UK personal allowance or other "nil rate band" to set against the interest, or perhaps can make a claim for a double taxation agreement to apply. Note from April 2015 UK Govt is proposing to introduce a nil rate savings band for interest of the first £5000. Currently there is a 10% savings band up to £2880, so interest in that band is only subject to tax at 10% not 20% , but tax is deducted at 20% However, that savings band does not apply to everyone, it depends on the individual's other mix of income

Obviously if the interest has been paid gross there is no tax deducted from it. Gross interest status will only be given by the bank on a particular account if it is certain the taxpayer will not be taxed on the interest. There is a cap on the tax payable by a non-resident person on UK interest which is generally the tax deducted from that interest see HMRC's Savings and investment manual: SAIM1170: http://www.hmrc.gov.uk/manuals/saimmanual/SAIM1170.htm

To quote from the HMRC guidance( leaflet RDR1 - page 42) http://www.hmrc.gov.uk/cnr/rdr1.pdf
UK Tax on investment income – when you are not UK resident
6.48 Although you are not UK resident you are liable to UK tax on investment income from UK sources. There is a restriction on your tax liability for investment income (See SAIM1170). This restriction is not available for any tax year in which split-year treatment applies (see section 5 of the SRT Guidance Note (RDR3)). You might also be able to receive tax relief under the terms of a double taxation agreement, if one applies.

----

----In short UK Bank interest is taxable both in the UK and in France

The French should give a tax credit for the tax paid, if perchance the tax cannot be reclaimed from the UK (i.e. the Double taxation agreement operates) - but I repeat the tax credit is that of the French tax calculation, not the actual tax paid. If one is paid the interest gross in the UK then there is no problem.

If the tax allowances were removed for non-residents, then the tax bill rises and the tax credits given by the French would be even further below the actual tax paid.

The teacher's pension falls into the same trap of the tax credits.- I myself receive a teacher's pension. The tax credit given by the French tax office is not of the actual tax paid to the UK-HMRC but the tax which the French believe should have been paid by THEIR calculation - which is most often less than the actual tax paid.

Have you been able to reclaim tax from HMRC by virtue of the fact of being non-resident?

13

Brian, I think you are not correct regarding bank interest. Tax on this is payable in the country of residence, ie for us in France, it is taxable in France. The fact that some banks and building societies deduct tax is a red herring as the tax can be reclaimed from HMRC.
Private pensions are taxed here in France and not in the UK. Government pensions, such as my wife’s teachers pension, are taxed in the UK but declarable in France and credit given for tax paid - even if the tax actually paid is zero due to tax-free allowance in UK.

14

So write to your MP (last UK address)!

As Carol L-F said, we are not political enough here, Brian Cave's petition has only 3000 odd signatures, a pathetic response. Politicians are only interested in staying in power, thus they will only react if they think that they're going to lose votes. These proposals, no matter how they are interpreted, should never have seen the light of day and are a prime example of Expat bashing, designed to give the impression that we are all rich, idle wine drinkers living the high life on the backs of poor downtrodden workers. We would not have lost our WFA if we'd had a voice in Parliament. I urge everyone to sign the petition(s) and comment on the consultation. You could say that these rumours are hurting the housing market here such that those of us who have to move back will end up in UK poor and homeless!

OK, I admit it, my wife bought me a Dad's Army "We're Doomed" t-shirt (:/

15

The consultation document on ‘restriction of personal tax free allowances’ ought to be read carefully.

There are errors of fact in it.

1. That relating to the Double Taxation Convention.

2. That other States do not grant tax free allowances for their citizens abroad.

Concerning the second I am assured that the USA does grant the allowances for their citizens resident abroad.

Concerning the first [Double Taxation Conventions] see below – it is an extract from my own submission to HMRC.

The Double Taxation Conventions

Attention must be drawn to the misleading wording in the paper .

Section 6.2 states : –

However most of these individuals would be able to claim relief overseas either in the form of a credit for tax paid in the UK or exemption from tax in their home state.# Therefore most individuals would not generally pay more tax overall than they do now***. However this will depend on the relative level of tax rates and allowances between the UK and their country of residence.

# if the taxpayer specifically claims under a double taxation treaty!

***This Statement is sending/implying false information- Under the French/UK Double Taxation Convention (and indeed most others) the tax relief on tax paid in the UK IS NOT the actual tax paid but the tax that would have been paid if the income had been taxed in France. As it is, those who have their pensions taxed ‘only’ in the UK are quite clearly disadvantaged##. Such disadvantage would be very greatly exaggerated for other recipients of private pensions, earned income, rents etc. from the UK if the personal allowance were removed. It is extremely unlikely that the tax credit given against a French Tax demand on world-wide income, in respect of tax paid in the UK is ever equal to the tax paid in the UK.

Thereby any resident who pays tax which would fall under a Double Taxation Treaty would lose out, because of the different levels of tax regime. The removal of the Personal Allowances would exacerbate this.

##The elderly expatriate in France who receives all their income from the UK, the majority of which in taxed in the UK is currently disadvantaged because any tax credits achieved in France [e.g for home helps – charitable support] cannot be set against the taxes paid in the UK, but only against a minimal tax liability in France. They therefore pay a bundle of tax to the UK , none to France, and overall far more than if they were only taxed in France on all the income.

-------

All income sourced in the UK is subject to UK tax unless specific rules allow otherwise. The State Pension and many private pensions are thus allowed to be ‘exported’ for tax purposes.

But some pensions are not so exportable. Also UK Rents and UK Bank interest are all taxable in the UK.

Rents If rents are collected via an agency, they are subjected to tax at source. This is regulated by a tax code issued by HMRC. If the allowances are removed, the tax will be payable from the first £.

Bank Interest. The same applies. It happens that it is possible for non-residents to have the interest paid gross, but some banks refuse to do this. Even so, if those recipients are required to complete a tax a return to HMRC, tax is liable on that interest.

Those who receive ‘government service’ pensions may well escape, but perhaps not if they do not make a ‘hell of a fuss’. I am aware that the accountancy profession in the UK is making protests about these proposals to restrict the allowances.

If this change were to be implemented many people would suffer horrendously. If you have to disclose what percentage of your income is sourced from the UK, this is a step towards disclosing your worldwide income to the UK authorities even if you do not live there. That is what USA citizens are supposed to do.

HMRC need to be made aware of :- The errors in the ‘paper’; the potential effect on the number of people who receive pensions taxable in the UK; the effect on those retired folk who depend on rental incomes on property retained in the UK.

The address to write to is

nonresidentspersonalallowanceconsultation@hmtreasury.gsi.gov.uk

It is no good expecting HMRC to automatically act with thought and care towards the British Citizen. Their interest is to collect as much tax as possible. If the citizen doesn’t yell out – they assume they are not bothered! The paper is a ‘consultation’ paper. You are asked for your opinion – Why not give it!

By the way - that is why we need Members of Parliament to represent us.

16

Three years ago i opted to leave the UK tax system and switch to the French after living here in France for 18 months my tax went down to zero. I worked in the UK from the age of 16 to 62 with 7 years at college plus 5 years an engineering apprentice my parents brought me up with the attitude that if i want something i work for it, i followed the same principal with my children. At 62 i was forced to retire but i had in place a private pension also my OAP at 65 with my wifes pension a 4 years later so i expected to retire in reasonable comfort. First set back my wife who is 9 years younger than i can now not receive her pension for another 8 years after the Gov raised the retirement age so we exist on just my pension then they remove the WFA, now, though it hopefully wont affect us the tax limit is to be juggled with, the removal of S1 for early retirees.They may be small things but constantly chipping away at ex pats who have the nerve to want to leave the UK for the remaining few years for what they consider a better life. While on the other hand there is a close family member by marriage who is a single parent never worked a day since leaving school and has no intention of ever working by her own admittance who is receiving as much in housing benefit alone as i do pension. Working in the UK most certainly does not pay

17

The problem would be with UK government pensions which are only taxed in the UK. They are not taxed in France (if you are resident in France for tax purposes) as a result of the double tax treaty between the two countries. This means that there would be no relief in France for the tax paid in the UK. However, section 5.2 of the document I posted yesterday suggests that the government don't intend for these proposals to affect these types of pensions and are considering an exemption for them.

There have been way to many scary headlines and not enough sensible explanation of these proposals. Anyone retiring to France who has no French income is unlikely to be affected. These proposals are designed to collect tax from non-Brits with UK source income and those expats that have significant income in their country of residence.

18

This mean-minded pensioner-bashing government is testing the water to see if it can raise yet more cash from the old folk. To date they have failed to raise the personal allowance for the retired from the £10k set by the last Labour Government since coming to power, and then they propose to take our WFA by dishonest accounting of the winter temperatures and now this.

There is a government website where you find more information is www.tinyurl.com/allowance-consultation and you can send your comments to: nonresidentpersonalallowanceconsultation@hmtreasury.gsi.gov.uk

I think it it time to get writing, to get voting (register if you have not already done so) and join Brian Cave and the expats campaign, the numbers in France are embarassingly low, www.votes-for-expat-brits.com & www.votes-for-expat-brits-blog.com.

People power does work and we are people who have done our bit for the country both in labour and in finance support. Now is the time for it to stop welshing on us.

19

I can't see the problem if you pay tax in France on your pensions - even if you are collecting gite rents from Uk into a UK account before transferring them to France. If you are not a UK taxpayer, it is surely immaterial whether you are, or would be, entitled to a UK tax allowance or not.

20

As the petition is for expats it is impossible for them to sign as it will only accept UK postcodes for some reason. I have signed with my son's postcode. If it could be amended to accept other postcodes there would be far more signatures.