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The government has introduced a new clause in the Finance Bill to prevent tax avoidance through the interaction of relief for pension savings and the provisions of certain double taxation arrangements.
In the absence of the measure, UK residents would have been able to avoid tax by transferring pension savings to any one of several overseas countries.
The new clause provides that, notwithstanding the terms of a double taxation arrangement with another territory, a payment of a pension or other similar remuneration may be taxed in the UK where:
- it arises in the other territory;
- it is received by an individual resident of the UK;
- the pension savings in respect of which the pension or other similar remuneration is paid have been transferred to a pension scheme in the other territory; and
- one of the main purposes of any person concerned with the transfer of pension savings in respect of which the payment is made was to take advantage of the double taxation arrangement in respect of that payment by means of that transfer.
If tax is paid in the other jurisdiction, appropriate credit will be available against the UK tax chargeable.
The new measure has effect in relation to payments of pensions or other similar remuneration made on or after 6 April 2011.
