SECRET
جيرا
295
066236
MDHOAN 1154
SECRET
FM FCO
TO IMMEDIATE HONG KONG TELNO 975
OF 180946Z NOVEMBER 93
AND TO IMMEDIATE PEKING, UKREP JLG HONG KONG
HONG KONG PERSONAL FOR PS/GH
PEKING PERSONAL FOR CHARGE UKREP PERSONAL FOR DAVIES
YOUR TELNO 1744 AND PEKING TELNO 1496: HMOCS
7
QUST ?
ним 233/1
19.10. 1993
!
1.
Thank you for the comments in TURs.
2. We agree that the Chinese should be briefed and would be grateful if, as you suggest, UKREP would do so at the routine weekly meeting next week.
3.
On the briefing itself, we agree with the approach set out in para 3 of your TUR, and Look forward to your draft speaking note. We do not think this need go into much detail on the package. In particular we think it better that no/no mention be made to the Chinese of the proposal to phase payments in the compensation scheme over five years. This is because we may/may need to secure Treasury agreement that the payments could instead be made as one lump sum on retirement, either if the Association propose this during the consultations, or if this could help a potential problem over liability for UK income tax which has arisen (see paras 4 and 5 below).
The Inland Revenue have advised that officers who continue working in Hong Kong (until the 5 annual phased payments have been made) will not be subject to tax as they will continue to be non-resident, but those who retire to the UK before this period is completed will be taxed. The Revenue are aware that in previous cases officers were not subject to tax on compensation, but they have pointed out that this was because compensation was paid (next eight words underlined) by the territory concerned and not by HMG (they are also aware that in these cases HMG reimbursed the cost through aid).
5. If HMOCS officers who retire are required to pay tax on their
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