Saturday, October 9, 2010

Weird World of Government Pensions


DOUBLE TAXATION MYSTERY.
Her Majesty’s Revenue and Customs [HMRC] publish ‘A listof Double Taxation Agreements [DTAs].’
There is also a link to guidance on whether a particular pension is treated as being a ‘Government’ type pension in the HM Revenue & Customs International Manual. This is available at :--

The reading of these documents gives rise to several mysteries.

In relation to the DTA France/UK, we read under the column concerning Government Pensions that ‘full relief’ from taxation is available. This would mean full relief from taxation in France of this revenue for British Citizens resident in France. To this statement is attached a ‘Note’ . This note reads ‘Under new treaty, for income paid on or after 6 April 2010. No relief prior to that date.’
This is a mystery! Pensioners receiving a Government Pension (Teachers, Police, Firemen etc.) have had relief from French taxation for years. However, in a certain sense it has not been ‘full relief’. One has had to declare this revenue on the tax forms. This has affected any tax or relief (fairly or not!) on any other revenue, including the Old Age Pension which is taxable in France, by indicating a threshold of world-wide income. Thus the note seems odd.  Have I missed something?
A new DTA did come into operation this year. I have both the old and the new and cannot see any material difference between them with respect to Government Pensions. I have written to HMRC asking what has materially changed on April 6th 2010. If the declaration of this tax on the French tax forms has changed, then this would bring France into alignment with the situation in Spain and indeed it would be a very important change.

Concerning Government Pensions. Perusal of the second document shows some weird bureaucratic situations. NHS pensions are largely deemed to be ‘non-government’ pensions.
But if an NHS pensioner moved to Germany it becomes a ‘government’ pension.
A policeman's or a fireman’s UK pension in France is a ‘UK government’ pension. In Greece , Israel and quite a few other odd countries it is deemed a ‘non-government pension'!
One also notes that this table of information is a good deal out of date, since it refers to ‘Yugoslavia’! But no doubt it is still ‘legal’!