PA AROCS Policy
CONFIDENTIAL
25 June 1993
HKA 233/1
2&vem 1993
Kevin Woodfield Esq
HM Treasury
Foreign & Commonwealth
Office
London SWIA 2AH
2702651 Telephone: 071-
Dear Kern,
HMOCS: TAXATION OF COMPENSATION PAYMENTS
One subject which we did not get a chance to cover at our meeting on 16 June is the question of taxation of the compensation payments for HMOCS officers. I enclose copies of correspondence which we have had with the Inland Revenue about this matter and would be grateful if you could let me have your comments on their proposal.
As you may know, in previous territories, compensation awarded to HMOCS officers has always been treated as exempt from UK tax. This has been possible under Section 18 of the Income and Corporation Act 1988 which states 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 employed in the public services of that territory."
We wrote to the Inland Revenue late last year to check that such an exemption would also apply to any compensation payments which are made to Hong Kong HMOCS officers, although we stressed that no final details had been taken on the nature of such payments. As you know, the difference between Hong Kong and previous cases was that it was the Government of the former Dependent Territory who paid the compensation, although the funds for this were often provided by HMG.
The Inland Revenue informed us that because of certain changes in taxation legislation it would not be possible for the compensation payments made to those officers who retired in 1997 to be exempt from tax. However, having examined the various options, the Inland Revenue have suggested that one way to get around this problem would be to make an amendment to the Taxes Act by way of an inclusion in the annual Finance Act.
woodfield.tax/HMOCS/bp
1
CONFIDENTIAL
193
No comments yet.
Private notes are available after approval.