UK/US - Pension schemes are welcoming new international tax rules which simplify benefits for firms in the UK and the US.
Changes in the UK/US Double Taxation Convention mean members will not be forced to leave their scheme if they are seconded to work on the other side of the Atlantic.
HSBC Actuaries and Consultants research consultant John Wilson said that under the previous rules there were so many adverse tax implications for seconded workers it made almost no sense to stay in the scheme during any secondment.
He said: “This is a complete turnaround from the position that we had in the past where, for instance, UK employees seconded to the US would often leave the UK scheme because if they continued their membership they would be taxed on their employer contributions.”
But Hewitt Bacon & Woodrow principal Raj Mody believes the new rules “do not go far enough and are half-hearted”.
He said: “There are some rather complicated rules in relation to eligibility of members and limits on tax relief, which don’t make the rules as simple as they could be.”
Mody explained that a member would only be able to get tax relief up to the US limits, which could lead to a situation where they were not getting as much tax relief as they would in the UK.
Hammonds solicitor Frances Phillips Taft said: “The new US/UK tax treaty provides useful clarification on issues concerning the taxation of pension benefits for an increasingly mobile workforce.
“But these new rules also present new questions of interpretation; for additional guidance we must look to the tax authorities of the respective jurisdiction.”
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