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Old Dec 2nd 2015, 9:40 am   #1
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Default Pensions - escaping UK taxation

Note: this only applies to private and company pensions it does not apply to state pensions or those on a government pension.

Now I am by no means an expert in this field but am about to embark on the journey. This thread will document my progress, successes and failures so that others can improve their chances of success.

First off, when you leave the UK you are required to notify HMRC. This is done using form P85. Currently there are two links on HMRC web page, for either completing the form fully electronically or filling in an on-line form, printing and posting to HMRC. The firt option sounds good but only works if you are still resident in the UK. The registration process asks for a lot of information to prove your identity but sadly it does not accept non-UK telephone numbers or addresses. Uhhmmm I thought the idea was to tell them you are now living overseas. Indeed the P85 asks for your current address so I suggest delaying filling it in until you have secured a home for at least the next 12 months.

Another point to bear in mind, you will find it very difficult to manage investments in the UK after you become resident in malaysia so take your time to sort out any financial affairs before telling the tax man and bank that you have moved.

Anyway, here is the URL to get you started https://www.gov.uk/government/public...-tax-right-p85

The questions are pretty straightforward and you shouldn't have any problem filling it in but I have a copy of the old P85 form (attached) and found it useful to fill this in first. Note the questions have changed but by using the manual form first you will have gathered all the essential information. You will also need parts 2 & 3 of your P45. Before posting these I suggest you make copies.

With typical government efficiency, you will find that after completing the on-line form and printing it out some fields are left blank because you were not asked them! Do read the form carefully and make sure that you fill in any blanks. Once complete, this will need to be couriered to HMRC. You will find the address on page 6.

This form only serves to notify HMRC that you have left the UK. Depending on your date of departure you may or may not get an immediate tax refund. I left rather late and will probably need to apply for split taxation. Details to follow when I hear back from HMRC.
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Old Feb 4th 2016, 10:25 am   #2
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Default Re: Pensions - escaping UK taxation

I have received a letter from HMRC acknowledging receipt of my form P85. He then goes on to state that as I continue to receive income derived in the UK it will continue to be taxed until a review is carried out after 6th April 2016. This is not unexpected, although I continue to challenge HMRC.

In essence I left the UK too late in the year. For anyone contemplating moving to Malaysia upon retirement there are some key dates that you need to try to plan to utilise. The situation is complicated by the UK tax year running from 6th April to 5th April the following year whilst the Malaysian tax year runs from 1st January to 31st December.

The first key date to aim for is 20th April. If you leave the UK at any time between the 6th April to 20th April you will meet the 'Automatic Overseas' test (assuming you were resident in the UK and paying taxes in the previous years). In this case you are not liable for tax in the UK and you should get tax refunded back to the day you left the UK.

Leaving after the 20th April will qualify you as a UK tax resident unless you can establish residency elsewhere in that tax year. The key for this is that you must be resident in Malaysia for 183 days in the calendar year. A key date for this is 2nd July. If you arrive in Malaysia before the 3rd of July there is just enough time to get 183 days here assuming you do not pop over the border for a few days. There is some flexibility here in that if you come to Malaysia early in the year for a fact finding trip the authorities here will count those days towards your residency. Once you can show 183 days in Malaysia the authorities here will give you a certificate of residence (CoR) and you will be able to get your tax refunded back to your date of departure.

If circumstances prevent you leaving the UK in time to establish residency in the year of departure you will have to apply for a CoR the following year. This can be done as soon as you have spent 183 days in Malaysia. Keep a good record of any days where you take a break outside the country and make additional allowance to cover these periods. This will give you all that you need to convince HMRC that you are now resident in Malaysia and they should refund some tax to you. This is where the fun starts since the Malaysian tax year for which you are deemed a tax resident (even if you pay no tax) starts on the first of January but the UK tax year for which you have been deemed liable ends 5th April.

And this is where my current challenge as mentioned above starts. There is a general rule that persons should not suffer double taxation and I will be arguing that as a resident of Malaysia my primary taxing country is Malaysia and the UK is only secondary by virtue of previous residence status and therefore I should get a refund dating back to 1st January 2016.

If anyone has experience of this or has anything to add please let me know before I issue my challenge to HMRC. But I figure if Google can get away with telling the tax man how much they are willing to pay I should too.

Last edited by NeonHippy; Feb 4th 2016 at 10:28 am. Reason: Spelling correction
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Old Feb 4th 2016, 2:18 pm   #3
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Default Re: Pensions - escaping UK taxation

Just...good luck to you
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Old Aug 2nd 2016, 2:05 am   #4
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Smile Re: Pensions - escaping UK taxation

At last 183 days served in Malaysia and ready to do battle with HMRC.

Anyone following this thread, will need to do the following preparations.

Step 1, if you haven't already done so notify HMRC that you have left the UK. This is done with form P85. This can be done online by following this link https://www.gov.uk/government/public...-tax-right-p85. Notew that when you complete the form online you still need to print off a copy and post to HMRC. Once printed read the form carefully as there are some questions to be answered that do not get asked in the online process.

Step 2 is preparing the paperwork for the Malaysian Revenue Department. You will need to complete form STM1 which can be downloaded here http://www.hasil.gov.my/pdf/pdfborang/STM1_2.pdf. You will also need photocopies of every page of your passport and a record of entry and exit from Malaysia. A sample spreadsheet for this purpose is available here MM2H, residency and tax. In addition you should fill the HMRC application for double taxation relief available for download here https://www.gov.uk/government/upload...individual.pdf.

Step 3 is to take all of the paperwork from step 2 together with your passport to the LHDN office. In Penang this is located on the fourth floor of the modern brown building on Lebuh Pantai, close to the end by the Queen Victorie Memorial Clock. Take the lift to the fouth floor and go to the reception desk. Tell them you are applying for a Certificate of Residence and they will give you a ticket for the counters at the far end of the room. When your number comes up proceed to the desk and hand over your passport and all paperwork. Draw attention to the DT-Individual form and explain that the UK Authorities require this to be endorsed by LHDN in the panel at the bottom of page 1. The officer will check your passport against the copy and then hand back your passport telling you to come back in 3 days.

Step 4 is to return after three days and go to the reception desk and tell them you have a Certificate of Residence to collect. Take your passport with you as the reception desk will use this as proof of identity before handing over your certificate.

Step 5, the CoR contains your tax reference number. This should be added to your form DT-Individual. Take copies of the CoR and form DT-Individual. Send the original DT-Individual together with a copy of your CoR to HMRC. The address is on page 1.

Step 6, sit back and wait to see what HMRC say. I will report back on this at a later date.
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Old Aug 2nd 2016, 7:08 am   #5
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Default Re: Pensions - escaping UK taxation

Well done Neon. So you've lit the blue touch paper

Your post is timely, as I still haven't got around to Step 2, but I shall do so after the next holiday. All these holidays keep getting in the way
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Old Aug 3rd 2016, 12:13 pm   #6
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Default Re: Pensions - escaping UK taxation

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Well done Neon. So you've lit the blue touch paper

Your post is timely, as I still haven't got around to Step 2, but I shall do so after the next holiday. All these holidays keep getting in the way
It'll help me too. Thanks NeonHippy.

Whilst on the subject of Pensions, there’s an article in the Financial Times today, August 3rd, about how up to 1m retired workers under state pension age have the chance to build a bigger state pension at a heavily discounted rate.

See: http://www.ft.com/cms/s/0/46a54a64-3...#ixzz4GGYc6Kvk

Most FT articles are behind the subscription barrier. However it has a deal with Google whereby you can generally access one or two FT articles for free if you type the article headline into Google. The headline for this article is:

Taken early retirement? Here’s a cheap way of boosting your pension

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Old Aug 3rd 2016, 12:48 pm   #7
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Default Re: Pensions - escaping UK taxation

A very interesting article JC3. I wonder how HMRC will react when I inform them that I do not reside in the UK and have no desire to pay any income tax but I would quite like to pay national insurance contributions to boost my state pension?

I could use my tax relief to pay for the added contributions. Now that would be a sound investment.

Last edited by NeonHippy; Aug 3rd 2016 at 12:51 pm. Reason: Additional text added.
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Old Aug 3rd 2016, 2:51 pm   #8
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Default Re: Pensions - escaping UK taxation

I emigrated to South Africa where the UK has a taxation agreement with this country.
My pensions are classed as Crown pensions and as such, no matter where i am in the world, they will always be taxed. Whilst i gain no benefit i prefer to pay my tax in the UK.
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Old Aug 4th 2016, 3:58 am   #9
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Default Re: Pensions - escaping UK taxation

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Originally Posted by NeonHippy View Post
A very interesting article JC3. I wonder how HMRC will react when I inform them that I do not reside in the UK and have no desire to pay any income tax but I would quite like to pay national insurance contributions to boost my state pension?

I could use my tax relief to pay for the added contributions. Now that would be a sound investment.
I did exactly that. I left UK in 1974 and declared thru' the bank that I was no longer resident and had my banking transferred to their branch in the Channel Islands.
Since then I paid no tax but paid voluntarily (to age 65) to the National Insurance Scheme rather than throwing away my previous 22 years contributions.

I've received the OAP for the last 14 years but it's not indexed for inflation and hardly worth the paper/postage when they ask if I'm still alive...how the **** I'm supposed to tell them I've died still bewilders me...
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Old Aug 4th 2016, 4:40 am   #10
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I've received the OAP for the last 14 years ...how the **** I'm supposed to tell them I've died still bewilders me...
Politely?

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Old Aug 4th 2016, 7:54 am   #11
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Politely?

JC3
You got me thinking...what if I went to the USA and had my body cryogenically frozen like these guys... Who has cryogenically frozen themselves

Do you think that HMRC will continue paying my OAP as I'm not really dead and...UK pensions are index-linked to those residing in USA..
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Old Aug 4th 2016, 9:52 am   #12
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Default Re: Pensions - escaping UK taxation

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Originally Posted by Davita View Post
You got me thinking...what if I went to the USA and had my body cryogenically frozen like these guys... Who has cryogenically frozen themselves

Do you think that HMRC will continue paying my OAP as I'm not really dead and...UK pensions are index-linked to those residing in USA..
Now there is a great idea. For those of us not yet taking the state pension we could defer payment until we are revived. Deferred pensions go up by quite a considerable percentage each year they are not taken.
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Old Aug 10th 2016, 9:44 am   #13
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Default Re: Pensions - escaping UK taxation

I'm pretty sure I asked this question on a previous tax topic and didn't get a reply (I think). So I will ask again.

Are there any downsides to being Malaysian Tax Resident? What about with Malaysian investments, if you have any? What about if you have property and rent out? Does it make any difference?
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Old Aug 10th 2016, 10:27 am   #14
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Originally Posted by perky77 View Post
I emigrated to South Africa where the UK has a taxation agreement with this country.
My pensions are classed as Crown pensions and as such, no matter where i am in the world, they will always be taxed. Whilst i gain no benefit i prefer to pay my tax in the UK.
Similar here. We came to Philippines in July 2013, having sent a P85 to HMRC a few weeks prior, and I applied under the double taxation treaty for exemption for my 2 private pensions on 7th April 2015 as I had then been out of UK for a full tax year. Filled in DTT individual, got it certified by the IRS here and sent it off. About 4 weeks later got a cheque for overpaid tax and copies of HMRC tax schedule to my pension providers. Since then these have been paid gross. Now, my State pension is over the tax free limit so I can either do a self assessment each year and send HMRC a cheque for what i owe, or elect to have tax due deducted from one of my private pensions. Under the terms of our SRRV - similar to the MM2H I believe, I get exemption from tax on any funds remitted here. If I should - God forbid - take up a job here then I'll pay tax at local rates on what I earn here. My wife's pensions are both government pensions and so she cannot claim any relief and pays tax on them just as if she is still in the UK. What you can claim depends entirely on the DTT between your country and the UK.
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Old Aug 28th 2016, 5:09 am   #15
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Default Re: Pensions - escaping UK taxation

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Originally Posted by bakedbean View Post
I'm pretty sure I asked this question on a previous tax topic and didn't get a reply (I think). So I will ask again.

Are there any downsides to being Malaysian Tax Resident? What about with Malaysian investments, if you have any? What about if you have property and rent out? Does it make any difference?
The Malaysian tax code only taxes it's citizens on the income they generate within the country. Income from external sources are not taxed. So if you are here and working (not mm2h) you will be subject to tax on your income in Malaysia including investment and rental income. Tax in MY is banded but I havn't tried to work out the impact of this.

On MM2H and assuming your pension is coming from the UK but not a forces or government one then you will not pay tax on it. I'm pretty sure I read somewhere that under MM2H they will not tax you on investment income. They are probably just happy for you to be placing your faith in 1MDB and similar schemes. But if you buy property and rent it out I think you would be wise to declare it. The tax bill should be reasonably low as most of the rent will be inside your tax free allowance as all your other sources of income are non-taxable and you can of course offset any expenditure against tax.
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