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ORSO pension - UK tax implications?

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  1. #1

    Join Date
    Dec 2008
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    Sai Ying Pun
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    31

    ORSO pension - UK tax implications?

    Hi all,

    soon to be leaving HK to return to UK and will be eligible to take my ORSO benefits as a lump sum when I go.

    Since I will be working for the same group in the UK, they've said I can also leave it as it is until employer contributions are 100% vested, and then take the lump sum in a couple of years time.

    My question is whether any or all of the lump sum would be taxable in the UK if I wait until I'm UK resident before receiving it.

    From what I've read, I think the double tax treaty between UK and HK means that it would not be eligible for tax in the UK, since I've been working in Hong Kong for the full period when the benefits were being accrued.

    any thoughts from tax experts or people who have been in a similar situation?


  2. #2

    Join Date
    Oct 2015
    Posts
    1

    Hi There - This is a very complicated area to advise in but essentially for the fund to qualify for the tax privileges under the ORSO only HK earnings can be invested. Therefore if you are going to be seconded to the UK then it is essential to ensure that those earnings will be treated as part of your HK earnings.

    You should seek local tax advice in HK such as Lutea (Hong Kong) Limited who are situated in Central.

    Regards


  3. #3

    Dredging-up this topic as I will eventually face this situation as I'm sure many of you other British folks will also.

    Question 1: If, before I leave HK, I dispose of my ORSO (I guess also relevant for MPF), is this enough to avoid paying UK tax on the gains, or do I need to make sure I dispose in the prior tax year (I would therefore need to engineer my move date to be just before the end of a tax year)? Basically, are the rules the same for ORSO/MPF as they are for disposing regular stock holdings.

    Question 2: If I move with my company (permanent move to UK) and they give me the option to keep my ORSO ticking over until it reaches 100% vesting*, will the gains at disposal be taxable in UK given that I will by then be UK resident for tax purposes?

    *no clue if they will give me this option


  4. #4

    Join Date
    Feb 2021
    Posts
    1

    Hi, I am having the same question. Did you figure out the UK tax implication with you situation?


  5. #5

    Good timing. I’m in the process of leaving (august) and will get a tax consultation in a few weeks time then can say definitively. However I’ve done a fair bit of research and what I think happens is the ORSO (presumably MPF also) when liquidated is considered “income”. Due to the double taxation treaty between HK and UK, this “income” is free from UK tax. On the flip side, if ORSO is not fully vested you have to pay some sort of HK tax in light of that


  6. #6
    Quote Originally Posted by wharrison6:
    Good timing. I’m in the process of leaving (august) and will get a tax consultation in a few weeks time then can say definitively. However I’ve done a fair bit of research and what I think happens is the ORSO (presumably MPF also) when liquidated is considered “income”. Due to the double taxation treaty between HK and UK, this “income” is free from UK tax. On the flip side, if ORSO is not fully vested you have to pay some sort of HK tax in light of that
    Did you eventually get the definite answer on UK tax treatment to ORSO funds, was it exempted from UK tax under HK-UK Tax treaty?

  7. #7
    Quote Originally Posted by harisin_47:
    Did you eventually get the definite answer on UK tax treatment to ORSO funds, was it exempted from UK tax under HK-UK Tax treaty?
    Yes - it will not be taxed by HMRC. Interestingly, I was able to allow my ORSO to stay in HK until it fully vests to 100%. This is on condition that I stay with my same employer when in the UK (which has happened). There was only 6 months until full vesting but it means I get 100% instead of 90%

  8. #8

    Join Date
    Jun 2014
    Posts
    1,180

    Hi - just wondering whether you got specific advice for this, or whether there is something reliable on the WWW. If the latter, would you mind pointing me in the right direction please?

    gracias!



    Quote Originally Posted by wharrison6:
    Yes - it will not be taxed by HMRC. Interestingly, I was able to allow my ORSO to stay in HK until it fully vests to 100%. This is on condition that I stay with my same employer when in the UK (which has happened). There was only 6 months until full vesting but it means I get 100% instead of 90%

  9. #9
    Quote Originally Posted by Shiojiri Hiro:
    Hi - just wondering whether you got specific advice for this, or whether there is something reliable on the WWW. If the latter, would you mind pointing me in the right direction please?

    gracias!
    HMRC themselves confirmed it in response to a question posted on their BNO microsite: 2f415a95-da39-eb11-8fed-00155d975291

    Besides, I confirmed this point in my consultation with KPMG UK prior to returning to UK.

  10. #10

    Join Date
    Jun 2014
    Posts
    1,180

    thanks!


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