Anonymous
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Is it taxable?

Pension tax

Didn't find your answer?

My new client was overseas resident for 10+years and accrued deferred state pension during the period.

She took a pension lump sum last year for the deferred pension, but after moving to UK and becoming a UK resident. Consequently, paid basic rate tax on the lump sum.

I understand the tax point for pension lump sum is the year of receipt, but wonder if there is any benefit in arguing with HMRC that the deferred state pension was accrued/earned during her non-residency period and therefore should be UK tax exempt?

I am conscious of the potential foreign tax and there is no DTT provision with her former country of residence.  Apologies, if this sounds bit daft, but tax is quite large which she could have possibly avoided the lump sum was taken before coming back to UK.

Just wanting see if there is any merit in pursuing this with HMRC? If so, reference to legislation/HMRC guidance would be very helpful.

Many thanks

Replies (3)

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By Paul Crowley
17th Jan 2021 15:45

.Anon

You were warned by Aweb

Anon is not default, you chose it

This does not qualify by any stretch of site rules

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JCACE
By jcace
17th Jan 2021 18:39

As you say, it will be taxable in the year in which it was paid. That has provided a tax planning opportunity as it is taxable at the recipient's marginal rate of tax in that year. Your client may therefore have saved tax even if having to pay it.

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By Wanderer
17th Jan 2021 18:41

No merit at all in what you are proposing.

Considerable merit in actually reading the legislation on taxing state pension lump sums.

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