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Old 24.01.2018, 11:55
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UK tax on Swiss pension withdrawal

Hi,

When leaving Switzerland a couple of years ago I did not manage to withdraw my pillar 2 because I previously made some voluntary contributions. I actually bought back a few years of Swiss Pensions to put more money in the pot and save tax on a bonus that was paid to me over there. The money was blocked for 3 years and now I have started counting the days until I can take the money back (well, everything but the compulsory part).
I am trying to figure out what the damage will be when HMRC ask for their cut. I have been reading contradicting information and would appreciate if someone could advise.
I spoke to HMRC this morning who transferred me to at least 3 specialists but none of them could answer properly. Their default attitude was "you are not 55 so it is income, you'll have to pay tax" which am afraid is a little bit more complicated than that. But they will look into it and should get back to me at some point.
My understanding was there was a tax-free treatment for payments of lump sums relating to foreign service. I have also just found the following

Switzerland: double taxation agreement, Article 18: Pensions
(2) Notwithstanding the provisions of paragraph (1), a lump sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State.

Looks like tax is only due in Switzerland.
How did it work out for those of you who withdrew your Swiss pension?

Cheers
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Old 24.01.2018, 14:06
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Re: UK tax on Swiss pension withdrawal

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Hi,

When leaving Switzerland a couple of years ago I did not manage to withdraw my pillar 2 because I previously made some voluntary contributions. I actually bought back a few years of Swiss Pensions to put more money in the pot and save tax on a bonus that was paid to me over there. The money was blocked for 3 years and now I have started counting the days until I can take the money back (well, everything but the compulsory part).
I am trying to figure out what the damage will be when HMRC ask for their cut. I have been reading contradicting information and would appreciate if someone could advise.
I spoke to HMRC this morning who transferred me to at least 3 specialists but none of them could answer properly. Their default attitude was "you are not 55 so it is income, you'll have to pay tax" which am afraid is a little bit more complicated than that. But they will look into it and should get back to me at some point.
My understanding was there was a tax-free treatment for payments of lump sums relating to foreign service. I have also just found the following

Switzerland: double taxation agreement, Article 18: Pensions
(2) Notwithstanding the provisions of paragraph (1), a lump sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State.

Looks like tax is only due in Switzerland.
How did it work out for those of you who withdrew your Swiss pension?

Cheers
There is extra statutory concession A10 that exempts anything before April 2011, slightly more complicated after that due to 'disguised remuneration' rules that need to be read but probably won't concern you.
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Old 24.01.2018, 14:41
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Re: UK tax on Swiss pension withdrawal

Thanks Fatmanfilms. HMRC have confirmed to me my understanding of the double taxation agreement is correct. So only Swiss tax will apply.
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Old 09.03.2018, 18:19
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Re: UK tax on Swiss pension withdrawal

Hi Cadbury
i am exactly in the same situation as yours, just recently moved back to the UK.

Could you please let me know who/how you contact HMRC to get a confirmation of the above?

Thanks
Andrea
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Old 09.03.2018, 18:49
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Re: UK tax on Swiss pension withdrawal

Hi,
I just called the phone number that is on my payslip... I am sure you can find on google a general phone number.
Do not assume it is going to be easy or they are going to give you the information you need. I had to speak to many agents and their default answer was "you need to pay". They even asked a specialist to call me back, that person came back with the same answer and I had to challenge them about the double taxation agreement. They eventually reverted to me saying I was right according to this
https://www.gov.uk/hmrc-internal-man...relief/dt18167
As long as tax is paid in Switzerland when you take the pension pot, nothing needs to be paid here, no need to notify HMRC.


HOWEVER while googling the link above I have just noticed the UK are currently renegociating the double taxation agreement with Switzerland.
https://www.gov.uk/government/upload...-Swiss-DTC.pdf


I have yet to read the doc, understand what it means and check if it's going to have any effect on pension withdrawals.
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Old 09.03.2018, 18:58
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Re: UK tax on Swiss pension withdrawal

I don't know what you want to do with your Swiss pension fund, but why not leave it? There is an agreement between the UK & Switzerland and the pension would be paid monthly in £ into a UK bank account. (I get my UK pension paid in CHF to my Swiss account.)

In another 20 years, there will likely be less than parity £ v CHF - maybe the value of the franc will outweigh other investment ideas??
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Old 18.01.2019, 09:27
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Re: UK tax on Swiss pension withdrawal

Hi There, I see this thread is a year or so old, does anyone have an update on whether UK tax is payable on Pillar 2 withdrawals? I am leaving this month for the UK and moving my Pillar 2 to a vested benefits account in Schwyz. Local Swiss tax will be deducted if I request a payout. I would then want to top up the pension with my new employer and put it an an ISA and perhaps funds if there’s any left after that. Since a direct transfer to my new employer’s pension scheme is not an option, this is the only way I can move it there. I would expect that it should not be taxed the delta, and that I may even get tax paid back when moving it into my UK pension. Does anyone have recent experience of taking Pillar 2 non-mandatory pension pot to the UK? Many Thanks.
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Old 18.01.2019, 09:32
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Re: UK tax on Swiss pension withdrawal

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Hi There, I see this thread is a year or so old, does anyone have an update on whether UK tax is payable on Pillar 2 withdrawals? I am leaving this month for the UK and moving my Pillar 2 to a vested benefits account in Schwyz. Local Swiss tax will be deducted if I request a payout. I would then want to top up the pension with my new employer and put it an an ISA and perhaps funds if there’s any left after that. Since a direct transfer to my new employer’s pension scheme is not an option, this is the only way I can move it there. I would expect that it should not be taxed the delta, and that I may even get tax paid back when moving it into my UK pension. Does anyone have recent experience of taking Pillar 2 non-mandatory pension pot to the UK? Many Thanks.
Why would anything have changed in less than a year, nothing was mentioned in last years budget.
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Old 18.01.2019, 10:38
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Re: UK tax on Swiss pension withdrawal

A year ago, neither of the returning posters had confirmation of whether or not they would need to pay any UK tax on Pillar 2 pension pot cashing after leaving CH. there was still uncertainty. A year later, they would know for certain.
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Old 18.01.2019, 14:10
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Re: UK tax on Swiss pension withdrawal

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A year ago, neither of the returning posters had confirmation of whether or not they would need to pay any UK tax on Pillar 2 pension pot cashing after leaving CH. there was still uncertainty. A year later, they would know for certain.
Only if they bothered to tell the revenue, UK tax is self assessment.
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Old 18.01.2019, 14:40
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Re: UK tax on Swiss pension withdrawal

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Hi There, I see this thread is a year or so old, does anyone have an update on whether UK tax is payable on Pillar 2 withdrawals? I am leaving this month for the UK and moving my Pillar 2 to a vested benefits account in Schwyz. Local Swiss tax will be deducted if I request a payout.
Swiss Tax at Source can be recouped if you live abroad at payout time.
See form Q-IS
https://www.estv.admin.ch/estv/de/ho...formulare.html

The UK HMRC will have to be informed. In case you are a non-dom resident you can only recoup the Swiss tax on the portion which you actually transferred to the UK.

Hope you did not use a to expensive pillar 2 provider just to save tax which you can get back anyway. (Unless you doge UK tax and do not report the payment to HMRC)
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Old 18.01.2019, 14:44
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Re: UK tax on Swiss pension withdrawal

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Swiss Tax at Source can be recouped if you live abroad at payout time.
See form Q-IS
https://www.estv.admin.ch/estv/de/ho...formulare.html

The UK HMRC will have to be informed. In case you are a non-dom resident you can only recoup the Swiss tax on the portion which you actually transferred to the UK.

Hope you did not use a to expensive pillar 2 provider just to save tax which you can get back anyway. (Unless you doge UK tax and do not report the payment to HMRC)
If you reclaim that tax then it's 100% taxable in the UK, so a very bad idea for a UK resident..
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Old 18.01.2019, 15:43
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Re: UK tax on Swiss pension withdrawal

Switzerland: double taxation agreement, Article 18: Pensions


(1) Subject to the provisions of paragraph (2) of Article 19, pensions and other similar remuneration paid to an individual who is a resident of a Contracting State, shall be taxable only in that State.
(2) Notwithstanding the provisions of paragraph (1), a lump sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State.


Pay the Swiss Tax and leave it at that.


PS: if you move your money to Liberty just to get a lower tax rate on the withdrawal keep in mind they will charge you a withdrawal fee which may end up offsetting the saving. It all depends on how much money you have in your pot.
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Old 20.01.2019, 09:04
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Re: UK tax on Swiss pension withdrawal

Thank-you Cadbury, FMF,

It’s clear to me now. I did the sums taking the withdrawal fee into account, and it made sense for me to move the funds from Basel Stadt. I will also fill out the LOB form as I have nothing to lose by doing so. I checked first that I have enough UK State Pension (National Insurance) contributions. If I’d been short, I was going to make voluntary contributions first, then submit the LOB form. It’s a long shot, but let’s see.
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Old 25.03.2019, 16:14
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Re: UK tax on Swiss pension withdrawal

is the double taxation rule still inforce in 2019?? if i take my lump sum pension pot back to the UK am i only taxed in Switzerland?
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Old 25.03.2019, 16:15
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Re: UK tax on Swiss pension withdrawal

err i should read everything first before i post
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Old 25.03.2019, 16:20
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Re: UK tax on Swiss pension withdrawal

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is the double taxation rule still inforce in 2019??
Yes. Still the same version as since December 19th 2012.
You might check status of the agreement and current text here:
https://www.admin.ch/opc/de/classifi...291/index.html
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Old 03.10.2019, 18:59
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Re: UK tax on Swiss pension withdrawal

People are asking if the same rules still apply, I found via the Uk link that a new protocol is going to applied from Jan 1 2020!

The Swiss link someone gave still only shows the old law.

I have not yet understood the implications, but it starts like this:

Quote:
Protocol amending the 1977 UK/Switzerland Double Taxation Convention
Signed on 30 November 2017

Entered into force on 16 July 2019
The provisions of the Protocol take effect:  For taxes withheld at source, 1 January 2020

In Switzerland:  For other taxes, 1 January 2020

In the UK:  For income tax and capital gains tax, 6 April 2020  For corporation tax, 1 April 2020
If someone has a good understanding of any implications of taking pillar 2 out to the UK now, please let us know
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Old 04.10.2019, 16:57
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Re: UK tax on Swiss pension withdrawal

One interesting thing I did find out is this, having just spoken to LOB in Bern.
If you left Switzerland over a year ago, for the UK, LOB will wait four months before they will forward your letter to HMRC.

At the moment, the UK side will likely take at least several months to get back to them...

So a lot of patience required! (Say 7 months or more).
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Old 18.10.2019, 21:56
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Re: UK tax on Swiss pension withdrawal

Interesting find with possible implications for withdrawing pillar 2 tax free?

It seems ESC A10 no longer applies and has been replaced. From the quote below, it seems things have changed again after the Finance act of 2017!


Quote:
Application of ESC A10 after 5 April 2011
It was announced on 31 March 2011 that ESC A10 would largely be withdrawn as new legislation at Part 7A ITEPA 2003 would provide a ‘just and reasonable’ reduction in the amount of employment income chargeable to income tax for duties performed outside the UK. This new ‘just and reasonable’ reduction would operate for ‘overseas service’, however ESC A10 was to continue to apply to:
• payments of lump sum relevant benefits received directly from the employer; and
• payments of lump sum relevant benefits out of rights which had accrued before 6 April 2011.
To put this on a statutory footing, an Order was made on 4 February 2014 under section 160 Finance Act 2008. Article 5 of The Enactment of Extra-Statutory Concessions Order 2014 (SI 2014/211) inserted section 395B into ITEPA 2003 and this, together with the working of Part 7A ITEPA 2003, achieves the above limited continuation of the effect of ESC A10 where relevant benefits are provided in respect of ‘foreign service’.
ESC A10 does not, therefore, apply to lump sum payments made on or after 5 February 2014. Foreign service relief on such payments is given by section 395B ITEPA 2003 - see EIM15325 for details.
There are worked examples showing the operation of relief under both ESC A10 and section 395B at EIM15326.

Note: For lump sum payments made from a non-UK based arrangement on or after 6 April 2017 this treatment will only apply where the recipient of the payment is non-UK resident throughout the tax year of receipt.

If the recipient is UK resident, the payment may be a “relevant lump sum” taxable as pension income under Part 9 ITEPA 2003 rather than under the EFRBS provisions – see EIM74510 for more details
Does anyone understand whether a lump pillar 2 withdrawal would fall under Part 9 of Itepa or 395B ITEPA? OR to put simply, whether for people interested in doing this now (After 2017), this whole relying on the tax treaty still applies at all. Would they still be tax free?
(I am going to chase this with HMRC but previous posters have had a hard time getting to talk to right specialist).

I have posted here because not many people who will try this route will be non-UK resident for the entire year! So hopefully they can rely on part 9 Itepa 2003? Also, it is interesting that the law text only says non-resident. I assumed that would be relevant at the time of withdrawal. Yet the guidance says non-resident for the whole year!

PS. I am referring to build up before 2011.
edit: found a really good website explaining the 2017 changes: https://www.taxinnovations.com/overs...-changes-2017/
still not 100% sure what that means, still tax free except for any interest rate build up after 2017?

Last edited by muze7; 18.10.2019 at 22:10.
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