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HMRC internal manual

Pensions Tax Manual

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International: definition of a relevant migrant member

Glossary PTM000001
   

 

Definition
Circumstances in which entitlement to migrant member relief is retained where an individual joins a qualifying overseas pension scheme whilst UK resident

Definition

Paragraph 4 Schedule 33 Finance Act 2004

The Pension Schemes (Relevant Migrant Members) Regulations 2006 - SI 2006/212

An individual is a relevant migrant member of a qualifying overseas pension scheme if all of the following conditions are met:

  1. the individual was not resident in the UK when they became a member of the scheme,
  2. contributions are made to the scheme by, on behalf of, or in respect of the individual during a period of UK residence which began when they were a member of the scheme,
  3. the individual was entitled to tax relief on contributions to the scheme in the overseas country in which they were resident immediately before coming to the UK, or has been so entitled in any overseas country where they were then resident in the 10 years before they became UK resident, and
  4. the individual has been notified by the scheme manager that information concerning their benefit crystallisation events will be given to HMRC.

Under condition 1 an individual must have joined the scheme before arriving in the UK. Generally speaking, they will be treated as resident from their date of arrival even if their UK tax residence status for the statutory residence test (see https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt) would run from a different date. That is because the UK residence test in condition 1 is not a test for formal tax residence status for a tax year. Rather it is a test of whether the individual, as a question of fact, was actually UK resident at the particular date when they first became a member of the qualifying overseas pension scheme. A similar interpretation of when UK residence begins applies for conditions 2 and 3.

The condition at 2 means that an individual who ceased to be a member of the scheme before coming to the UK and who did not re-join it until after they had become UK tax resident cannot be a relevant migrant member.

Condition 3 applies irrespective of whether the relief to which an individual is entitled relates to their own contributions or to those made in respect of them by an employer. This condition will be met where the individual has not actually made any contributions to the scheme, but where if they had done so, they would have got tax relief. It will also be met where the employer has not made any contributions to the scheme in respect of them but had the employer done so the member would have been entitled to tax relief on those contributions. It is not necessary for the scheme to be established in the overseas country in which the individual was resident and receiving relief. If before coming to the UK someone was working in a country which does not relieve pension contributions or does not have any personal taxation they might still be able to meet condition 3 if they were working in that country for less than 10 years. Regulation 2 of the Pension Schemes (Relevant Migrant Members) Regulations 2006 - SI 2006/212 provides for when a member may meet condition 3 in these circumstances. In practice HMRC is not aware that there is any country within the European Economic Area which will not meet the requirements for countries in condition 3.

The meaning of “the scheme” for the purposes of conditions 1, 2 and 3 is extended in certain circumstances by the Registered Pension Schemes (Extension of Migrant Member Relief) Regulations 2006 - see below.

As regards to condition 4, the various benefit crystallisation events are set out at PTM088100.

PTM088200 provides guidance on when a member becomes entitled to a benefit, which is key to the timing of many BCEs.

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Circumstances in which entitlement to migrant member relief is retained where an individual joins a qualifying overseas pension scheme whilst UK resident

The Registered Pension Schemes (Extension of Migrant Member Relief) Regulations 2006 - SI 2006/1957

In certain circumstances an individual may be eligible for migrant member relief if they are tax resident in the UK at the time they join a qualifying overseas pension scheme. The Registered Pension Schemes (Extension of Migrant Member Relief) Regulations 2006 specify three circumstances in each of which the meaning of “the scheme” in conditions 1, 2 and 3 above can include a transferor scheme, or the original scheme, where an individual has to become a member of another qualifying overseas pension scheme.

The first circumstance is that there has been a block transfer (see PTM063150) on or after 6 April 2006 from the qualifying overseas pension scheme of which the individual was a member to the receiving qualifying overseas pension scheme. In which case the transferor scheme or the receiving scheme can be “the scheme” for the purposes of conditions 1, 2 and 3 above.

The second circumstance is that there has been a series of block transfers from one qualifying overseas pension scheme to another and the last of those transfers was made to the receiving qualifying overseas pension scheme on or after 6 April 2006. In that case any of the transferor schemes or the receiving scheme can be “the scheme” for the purposes of conditions 1, 2 and 3 above.

The third circumstance is that:

  • under the rules of a qualifying overseas pension scheme (“the original scheme”) on and after a specified date it is no longer possible for further accruals to occur;
  • a further qualifying overseas pension scheme (“the new scheme“) has been established to provide benefits in respect of rights accruing to members of the original scheme after the specified date;
  • more than one member of the original scheme has become a member of the new scheme in relation to all rights accruing after the specified date;
  • rights do not accrue to any member of the new scheme after the specified date under the original scheme.

In that case the original scheme or the new scheme can be the “the scheme” for the purposes of conditions 1, 2 and 3 above.

This means broadly that an individual’s entitlement to migrant member relief is preserved where:

  • pension rights are compulsorily transferred to a different qualifying overseas pension scheme as part of a company take-over or reorganisation, or
  • an existing scheme is closed to new accruals and consequently members are obliged to join a new, additional, qualifying overseas pension scheme in which their pension rights will be accrued thereafter.