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International Superannuation and Pension Management |
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Is IS&P subject to tax on its income, including gains for members of IS&P who may be domiciled, resident or ordinarily resident in the UK?
The income, including gains, accumulated within IS&P would not be subject to tax in the UK because IS&P would not be resident in the UK. The earnings of IS&P derived from contributions by the employer are not taxed on the members.
Is an individual who is domiciled, resident and/or ordinarily a resident in the UK subject to tax as a member of IS&P?
Where an individual who is domiciled but not resident in the UK and has made a contribution to IS&P personally and then becomes resident and/or ordinarily resident in the UK, the individual is subject to tax in the UK on the income arising under IS&P (i.e. the increase in value of IS&P) based on the following formula:
| Contributions by member | x | Income arising under IS&P |
| Total Contributions |
Are benefits in IS&P subject to tax in the UK when withdrawn and remitted to the UK by an individual who is either domiciled or not domiciled in the UK and is resident and/or ordinarily resident in the UK?
A pension payment from IS&P to an individual who is resident and domiciled in the UK would be assessed to tax in the UK on 90% of the pension income. A pension payment from IS&P to an individual who is resident in the UK but is not domiciled in the UK, would be subject to tax on the full amount of the pension, but only on the remittance basis. In this regard, it should be noted that to the extent that the pension from IS&P is not remitted to the UK, no UK tax would be levied on the pension.
A lump sum payment from IS&P to an individual who is resident in the UK (whether domiciled in the UK) would, if the contributions originally made to IS&P are predominantly from employment performed outside the UK for an employer outside the UK, be entitled to relief under Extra Statutory Concession A10 whereby the lump sum would be received in the UK without the imposition of UK taxation.
ESC A10 contains the following requirements, assuming that the member does not or did not control the employer making the contributions:
In the event that the above requirements are not met, the taxable component of the lump sum amount is apportioned between the relevant foreign service period and the UK service period.
Would entitlements held within IS&P on behalf of an individual who is domiciled in the UK, whether the entitlements are held on an allocated basis or a discretionary basis, be subject to inheritance tax in the UK?
To the extent that entitlements held within IS&P are employer contributions such entitlements would not be subject to inheritance tax in the UK whether the entitlements are held on an allocated or discretionary basis.
To the extent that entitlements held within IS&P are derived from employee contributions such entitlements would be subject to inheritance tax in the UK as part of the individual’s estate on death because the fund would derive from the employee by way of gifts with a reservation of benefit. However, it is likely that an exemption for IHT would be available - see “Inheritance Tax”.
This advice is provided by Squire Sanders & Dempsey in connection with the specific issues raised in connection with UK taxation. This advice is of no further application and does not represent a general explanation of the issues or a full review of the subjects covered. The advice should not be relied upon in any other context by any person. Professional advice should always be sought before any action is considered based on the above and no liability is accepted by Squire Sanders & Dempsey or any of its partners consultants or employees in respect of any action which might be taken or refrained from being taken by any person as a result of the contents hereof. No reproduction of the whole or any part of the contents of this advice is permitted without the prior written consent of Squire Sanders & Dempsey.
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