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Lifetime Allowance Tax Charge

Client has lived for some years in Australia and is  tax-resident there.

Formerly, he was UK resident and built up a substantial UK occupational pension, currently deferred.

The pension, which is in the region of £150,000 per annum, starts next year when he turns 65.

At that level there would normally be a substantial Lifetime Allowance Tax Charge not withstanding that he has applied for and received a Certificate for Fixed Protection from HMRC that fixes his LTA at £1,800,000. 

However, it looks like Article 18 of the UK/Australia Double Tax Treaty might protect him from the LTA charge because it provides that pensions are only taxable in the state of residence of the recipient - in this case Australia.

I don't have too much experience of the operation of Double Tax Treaties so I would be very grateful if anyone could confirm that Article 18 of the Australian Treaty would protect the client from a LTA tax charge.

Thanks. 

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Hope this helps

The normal rule is that a Double Tax Treaty will override Domestic Legislation but I think the area that you may have difficulty is that all Treaties normally list the taxes that are covered by both Contracting States so you need to determine if the LTA qualifies as a Tax covered by the Treaty.( I have NOT looked at the Treaty)

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I don't think so

The UK/Oz treaty covers Income Tax and S.214 FA 2004 does refer to the Lifetime allowance charge as a charge to Income Tax.

However, S.217 says that the scheme member and the scheme administrator are jointly and severally liable for the charge.  The scheme administrator's liability won't be extinguished by the treaty and they will need to pay the charge out of the funds they hold, meaning your client will ultimately bear the cost of the charge, in my view.

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