PA
врезно
Foreign & Commonwealth
Office
68
22 October 1992
(By Fax)
Mr D J Weeks
HKA OKE /1
Civil Service Branch Government Secretariat Lower Albert Road Hong Kong
London SWIA 2AH
Telephone: 071 270 2652
Dear Mr weeks,
UK TAX ON TERMINAL LEAVE PAY AND GRATUITY
62
Further to Michael Stone's letter to you of 15 September, the Inland
Revenue have now sent us a reply about this matter. (66067
The Inland Revenue has advised that the Statement of Practice (SP 18/91) Taxation on Terminal Leave Pay has universal application and does apply to Hong Kong Government employees who take up residence in the UK after 5 April 1992.
We asked the Inland Revenue whether it would be possible for a concession to be granted to Hong Kong Government officers so that all emoluments which can be properly attributed to their period of employment in Hong Kong would be declared exempt from tax in the UK. The Inland Revenue has advised that this would be very difficult to do without provoking claims for similar treatment from other employees receiving terminal leave pay.
However, as stated in Miss Ottewell's reply to Mr Burlington, which appeared in the fourth 1992 edition of Voice, there does seem to be a possible way of getting around this problem. If the leave pay is commuted into a lump sum which is paid prior to a return to the UK, and the contract of employment is properly terminated before the day UK residency is regained, then it is unlikely that the lump sum payment would be subject to UK tax. The employee would probably have to pay Hong Kong tax on this lump sum, but as far as we are aware terminal leave pay is subject to Hong Kong tax anyway.
Another alternative would be for the employee not to return to the UK until their leave had ended. However, I realize that this might be problematic for some officers who have accrued very long periods of leave.
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