HKA 016/1
Foreign & Commonwealth
Office
File (39
2 July 1992
P Bowen Esq
Board of Inland Revenue
Room 128
Sapphire House
550 Streetbrook Road SOLIHULL
West Midlands
B91 1QU
Der Mr Bowen,
London SWIA 2AH
Telephone: 071-
cc'd Mr Plumb, ODA
UK TAX ON TERMINAL LEAVE PAY AND GRATUITIES
1. We have been approached by the Civil Service Branch of the Hong Kong Government about an apparent change to the UK tax rules, effective from April 1992, whereby persons returning from abroad will have to pay tax on their terminal leave pay and gratuities. I should be grateful if you could let me know whether this change in practice applies to overseas service with the Hong Kong Government.
2.
I attach an extract from "Taxation" which sets out the revised "Statement of Practice SP 18/19". This appears to reverse the situation which has existed for many years in relation to salary and other allowances for overseas service paid or receivable after an officer has returned to the UK. You will appreciate that many officers returning to the UK have long periods of accrued leave because staff shortages, pressure of work and the exigencies of the service generally, have meant that they have been unable to take their full leave entitlement. The hardest hit will, of course, be those who are due to leave Hong Kong in the coming months, having made their plans on the basis that no UK tax would be payable on leave and gratuities earned in the service of the Hong Kong Government.
3.
This change in practice has apparently been brought about by a revised interpretation of the tax laws, rather than by new legislation, and with very little publicity. If it is the intention to apply the change to Hong Kong Government officers, we would ask that a special concession be granted to them to the effect that all emoluments which can be properly attributed to their period of employment in Hong Kong are declared exempt from tax in the UK.
4. Finally, as far as I understand, officers leaving
Hong Kong after June 1997 would not be liable to such tax in
WADAEP
JRB