AND
REVENUE
Inland Revenue
mr when fi
Alec Harper, 'CARA is going to
my + decipher mis
letter with me help Personal Tax Division of the relevant, (Schedule E) acts + check that it is
right. Once he has done this either he or Brian Foy will ring to dis ans the implications of it
Bridget Paris
Hong Kong Department
Foreign & Commonwealth Office
London
SW1A 2AH
Dear Ms Paris
with us.
BP 1811
Your reference
Sapphire House
550 Streetsbrook Road Solihull
B91 1QU
Telephone 021 711 3232
Our reference SAP 128/PMB/555
RY
LIKA_233/1
19 JAN 1993
YESK OFFICER
EX
PA
Adior Take
REGISTY
Date 15 January 1993
HONG KONG HMOCS OFFICERS: COMPENSATION PAYMENTS
Thank you for your letter of 8 January and the very useful information supplied therein. I have now considered the various aspects of this situation and have concluded that it will be necessary to consider separately the 2 distinct groups of officers who may receive compensation under the proposed scheme.
I will consider first the officers who decide to continue employment in Hong Kong post 1997 and who will be receiving compensation for the changes in their conditions of service applicable after that date. As I explained to Alan McDonald when we first discussed this matter last year that compensation would, under United Kingdom tax law, be classified as "emoluments from the employment" being referable to changes in the terms under which services are rendered by the officers and/or an inducement to continue in employment after 1997. However as the officers are not UK resident and as the duties of the employment are not performed, nor deemed to be performed, in the UK, the charge under Section 19(1) of the 1988 Act on emoluments will not bite (any more than it would on normal earnings from the employment). (These remarks are subject
to the same point made in the correspondence with Miss Ottewell that Section 19 will however bite if, prior to eventual termination of the employment, the officer resumes UK residence and receives a compensation payment).
After Section 19, the next possible charge under Schedule
E is found in Section 596A of the 1988 Act which imposes liability on benefits from certain retirement benefit schemes. No charge under this Section will arise either provided the compensation arrangement for officers staying on in Hong Kong is set up and administered separately from that which will apply to those voluntarily retiring in 1997 (see below). The exclusion of Section 596A then leads into Sections 148 and 188 of the Act and the specific exemption which Section 188(1)(f) provides.
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