NLAND
REVENU
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Noted
week
20/10
Inland Revenue 22/10
8P
Personal Tax Division
MV Stone Esq
Hong Kong Department
LONDON
Foreign & Commonwealth Office
SW1A 2AH
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4
Somerset House London
WC2R 1LB
Telephone 071-438670x (6622)
FAX 071-438-6906
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16 October 1992
67
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UK TAX ON TERMINAL LEAVE OF HONG KONG GOVERNMENT EMPLOYEES
•61
66%
(39)
за
Br 22110
Further to my letter of 12 October I am now in a position to respond fully to your letters of 14 September to myself and of 2 July to Mr Bowen. I apologise for the delay in replying, but I was waiting for advice from our International Division about the double taxation agreement point that you raised in your letter to Mr Bowen.
Let me say at the outset that SP18/91 has universal application and it does apply to employees of the Hong Kong Government who take up residence in the UK after 5 April 1992. You have asked for a concession to exempt from tax any emoluments attributable to employment with the Hong Kong Government, regardless of the residence status of the individual. I am afraid that it would be very difficult to do this without provoking claims for similar treatment from other employees receiving terminal leave pay. In any case there seems to be reasonably simple action which the Hong Kong Government might be able to take to alleviate the problem.
As far as I am aware, the terminal leave pay of Hong Kong Government employees will be, and always has been, subject to Hong Kong tax regardless of where the leave is taken or of the residence status of the employee. If, as I suggested in my letter to Mr Burlington, 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 will be subject to UK tax. I believe that the employee would have to pay Hong Kong tax on this lump sum. But, as I said earlier, Hong Kong tax would be charged on terminal leave pay in any case, so commuting the leave pay would seem to provide a solution which does not involve issuing a concession. Alternatively, employees would not be subject to UK taxation if they did not return to the UK until their leave had ended.