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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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International: migrant member relief

Glossary PTM000001
   

Conditions for migrant member relief for an individual
Limits on tax relief for individuals
Claims for relief by individuals
Migrant member relief for employers

Section 188 and Schedule 33 Finance Act 2004

Under migrant member relief individuals and employers can get UK tax relief on contributions paid to an overseas pension scheme as if those contributions were made to a registered pension scheme.

Where tax relief has been given the individual member can be liable to UK tax charges in respect of pension savings made under the scheme and payments made by the scheme. These tax charges are:

  • the annual allowance charge - see PTM113300,
  • the lifetime allowance charge - see PTM113400,
  • the member payment charges - see PTM113200.

Conditions for migrant member relief for an individual

For an individual member to qualify for migrant member relief on contributions made by them or on their behalf they must meet all the following conditions:

  • The individual must be a ‘relevant migrant member’ (see PTM111300) and must meet all the following conditions:

    • they must have relevant UK earnings chargeable to income tax for that year. This can include income from self-employment, but in no case can it include earnings that are not taxable in the UK under a double taxation agreement,
    • they must also be resident in the UK when the contributions are paid (so payment can be anytime from their date of UK arrival to their date of departure), and
    • they must have notified the scheme manager that they intend to claim migrant member relief.
  • The overseas pension scheme must be a qualifying overseas pension scheme (see PTM111400) before the individual claims relief on their contributions to it. The scheme does not have to be a qualifying overseas pension scheme when the contributions are made but it must still be an overseas pension scheme (see PTM112200).

An individual can receive migrant member relief or transitional corresponding relief if they are also contributing to a UK registered pension scheme subject to overall limits.

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Limits on tax relief for individuals

Paragraph 1 Schedule 33 Finance Act 2004

Where an individual member is entitled to migrant member relief, tax relief on contributions is given under section 188 Finance Act 2004. The amount of tax relief that may be given is limited by section 190 Finance Act 2004. This means that there is an overall limit on the amount of contributions made to both overseas pension schemes and registered pension schemes in a tax year that may get tax relief. The maximum amount of member contributions that may receive tax relief is 100 per cent of the member’s relevant UK earnings that are chargeable to UK income tax for the tax year.

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Claims for relief by individuals

Paragraph 1(3) Schedule 33 Finance Act 2004

An individual can only obtain migrant member relief by making a claim to HMRC in accordance with section 194 Finance Act 2004. Tax relief cannot be given under the net pay arrangement or relief at source. PTM111700 provides guidance on how an individual can claim relief from HMRC.

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Migrant member relief for employers

Paragraph 2 Schedule 33 Finance Act 2004

Employers may be relieved from tax liability on their ’relevant migrant member contributions’ as if they were contributions to a registered pension scheme. Relevant migrant member contributions are those made to a ‘qualifying overseas pension scheme’ (see PTM111400) in respect of an employee who is a ‘relevant migrant member’ of the scheme (see PTM111300). The scheme has to be a qualifying overseas pension scheme when the contribution is made for this relief to apply.

Employer contributions are allowed as deductions under section 196 Finance Act 2004 if they satisfy the normal rules for trading income - meaning they must have been made wholly and exclusively for the purposes of the employer’s trade (see PTM043000 for more details on the conditions). This facility is strictly limited to employer contributions and no other sums because Schedule 33 Finance Act 2004 applies section 200 Finance Act 2004 to such contributions (as if the reference there to contributions under a registered pension scheme included relevant migrant member contributions).