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Policy
BP19112.
10 December 1992
P Bowen Esq
Board of Inland Revenue
Room 128
HKA 233/1
Sapphire House
550 Streetbrookes Road
SOLIHULL
West Midlands
B91 1QU
Foreign & Commonwealth
Office
650
London SWIA 2AH
Telephone: 071-270 2652
bear the bowen,
HONG KONG HMOCS OFFICERS
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COMPENSATION PAYMENTS
attached
Alan McDonald in the ODA wrote to John Payne on 29 April about the tax status of payments made to former members of Her Majesty's Overseas Civil Service (HMOCS) under the colonial compensation schemes I enclose a copy of his letter for ease of reference. As you may know, he asked you to delay replying until we were in a position to let you have more definite information about the arrangements which could be introduced for members of HMOCS who are currently serving in Hong Kong.
Discussions are still taking place between ourselves, the Treasury and the Hong Kong Government over the type of compensation scheme which could be introduced. No final decision has yet been taken but one of the options is a scheme along traditional lines where each officer would receive actuarially assessed compensation payments to mark the loss of their career as members of Her Majesty's Overseas Civil Service. Such a scheme would involve officers receiving an initial payment (perhaps 20%) at the time of ending of sovereignty, with subsequent payments made at annual intervals over a period of perhaps five or six years. If the officer retired before say 2003 and returned to the UK, he would receive one or more compensation payments while resident in the UK.
The compensation for these officers, which has often be paid over a period of a number of years after the ending of British sovereignty, has always been treated as exempt from UK tax. Section 18 of the Income and Corporation Act 1988 says that tax will not be charged on "compensation for loss of career, interruption of service or disturbance made in connection with any change in the constitution of (such) overseas territory to persons who, before the change, were