Page
APR=1992′′ 12:24=
PAUL FIFOOT
FAXED TO. J. FUH (CDA) 22/4
0372723755
HKA 233/1
File
P.01/03
257
Mr Stone
Hong Kong Dept
FCO
Fax: 071 270 3387
A. TAX
HK COMPENSATION SCHEME: MISCELLANEOUS POINTS
Our Opening Statement does not advert to tax. The telegramme which I amended last Thursday asked HK what would be the position under HK law of payments under HMG's scheme. We need to be sure what will be the position under UK law when we have discussions with the HMOCS association next month, and this means ensuring that the Revenue will go along with what we say. I do not think that we need approach the Revenue ourselves; can ask the Treasury to ensure that the Revenue are content with our proposals and will not raise objections to an Order in Council which seeks to give crfect to them.
We should put the proposals in this way:
there will be a lump sum payment by way of compensation to IIMOCS officers serving in IIK which will be payable at some time prior to 1 July 1997*; this cum will be a fraction of a notional sum calculated according to factors which are arrived at on the basis of the officers age, service and salary in the service of the Colony of Hong Kong and converted into sterling with increments depending on increases in the UK RPI. It is possible that some of the officers may have taken up residence in the UK by the time the payment is made;
there will be further sums payable over a period of years to former HMOCS officers who continue to serve the SAR and remain in that service when the particular payment is duc; these sump will also be- fractions of the notional sum referred to above. Since entitlement to these further sums depends on further service, there is at least a significant element of inducement in the payment. Although payment depends on continuing service with the SAR, it is possible that some of the officers concerned or their wives will have established residence in the UK, or that a payment will be made after they have in fact left the service of the SAR;
- it is possible that the balance of the notional sum could be paid to an officer who is retired from the service of the SAR in certain circumstances and that the officer who receives it will be resident in the UK at the time he receives the balance; **
il is plupused iu take sisiuiuly púweis lů make the scheme by Order in Council which would exempt all payments from UK income tax.
* We may decide that it would be inadvisable to make the
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