Like Tree1Likes
  • 1 Post By bdw

UK tax resident paying tax on MPF balances in HK?

Closed Thread
  1. #1

    UK tax resident paying tax on MPF balances in HK?

    If somebody for some reason could not cash out their MPF when leaving HK, and moved to the UK, does anybody know how the MPF is treated by HMRC? I guess many of the people on BNO visas will be in this situation since they cannot cash out the MPF immediately.

    Would the MPF account be treated like a general investment account, i.e subject to both capital gains and income tax?


  2. #2

    Join Date
    Jan 2012
    Posts
    34

    I'm guessing that you will need to pay CGT on any gains from when you left HK to the date you finally withdraw them.

    But best ask a UK accountant.


  3. #3

    Join Date
    Aug 2017
    Location
    Beautiful Britain
    Posts
    2,089

    Not recommending but just a thought. I sent around £200,000 from HK to UK whilst I was in HK and after I left. Most was personal savings some was MPF. HMRC were never involved. How would they know it had come from MPF?

    Also, surely the CGT on your MPF would be minimal. It's not possible to save a lot in the MPF so gains can't be that great? Unless you have been in HK for decades? CGT allowance/threshold is around £10k.

    Last edited by Pauljoecoe; 05-10-2021 at 02:51 PM.

  4. #4

    Join Date
    Feb 2009
    Posts
    8,306
    Quote Originally Posted by Pauljoecoe:
    HMRC were never involved. How would they know it had come from MPF?
    If you fail to declare overseas income on UK tax return, there will be no problem initially, they will accept whatever you claim without questions and give you your tax refund or bill as usual. But then you have to sweat for the next 5 or 7 years or whatever the rule is on how long you need to keep tax records for, hoping you are not selected for an audit. Then if you are selected for an audit, you will need to decide your strategy whether you continue to hide this overseas income or fess up. One common strategy is the "play dumb" manoeuvre. This involves you making no mention of said overseas income, then if they find it you act all surprised and say "I had no idea I had to declare this". Then cross your fingers that the penalties they impose are not too steep.

    Quote Originally Posted by Pauljoecoe:
    Also, surely the CGT on your MPF would be minimal. It's not possible to save a lot in the MPF so gains can't be that great? Unless you have been in HK for decades? CGT allowance/threshold is around £10k.
    I think I got around $600,000 in my MPF after 12 years in HK. This is a fairly standard amount for this period of time ($3k/month by me and employer). So now I just leave it and growth should be around $30k-$50k/year I hope. So if I hold for another 10 years, I make a capital gain of $300k - $500k, then this is more than the allowance of £10k, right?
    Morrison likes this.

  5. #5

    Join Date
    Jan 2012
    Posts
    34

    Its a yearly allowance. If you're leaving HK best withdraw it if you can.


  6. #6

    Join Date
    Aug 2017
    Location
    Beautiful Britain
    Posts
    2,089
    Quote Originally Posted by bdw:
    If you fail to declare overseas income on UK tax return, there will be no problem initially, they will accept whatever you claim without questions and give you your tax refund or bill as usual. But then you have to sweat for the next 5 or 7 years or whatever the rule is on how long you need to keep tax records for, hoping you are not selected for an audit. Then if you are selected for an audit, you will need to decide your strategy whether you continue to hide this overseas income or fess up. One common strategy is the "play dumb" manoeuvre. This involves you making no mention of said overseas income, then if they find it you act all surprised and say "I had no idea I had to declare this". Then cross your fingers that the penalties they impose are not too steep.



    I think I got around $600,000 in my MPF after 12 years in HK. This is a fairly standard amount for this period of time ($3k/month by me and employer). So now I just leave it and growth should be around $30k-$50k/year I hope. So if I hold for another 10 years, I make a capital gain of $300k - $500k, then this is more than the allowance of £10k, right?
    You are right. As I said if you have been there decades it might impact. It's a pity that income gained over a long period gets taxed as income in 1 year when you return to UK. Seems unfair?

    Regarding the other points I made. As Income earned abroad is not subject to tax and I wasn't a UK resident at the time I assumed there is/was no need to declare. Are you suggesting otherwise. ( Obviously, money moved over after returning and becoming resident again might be a different matter)

  7. #7

    Join Date
    Mar 2010
    Posts
    6,814
    Quote Originally Posted by Pauljoecoe:
    You are right. As I said if you have been there decades it might impact. It's a pity that income gained over a long period gets taxed as income in 1 year when you return to UK. Seems unfair?

    Regarding the other points I made. As Income earned abroad is not subject to tax and I wasn't a UK resident at the time I assumed there is/was no need to declare. Are you suggesting otherwise. ( Obviously, money moved over after returning and becoming resident again might be a different matter)
    I think the point is what year you realized the capital gain that has accumulated over the years.

  8. #8

    Join Date
    Feb 2009
    Posts
    8,306
    Quote Originally Posted by Pauljoecoe:
    You are right. As I said if you have been there decades it might impact. It's a pity that income gained over a long period gets taxed as income in 1 year when you return to UK. Seems unfair?

    Regarding the other points I made. As Income earned abroad is not subject to tax and I wasn't a UK resident at the time I assumed there is/was no need to declare. Are you suggesting otherwise. ( Obviously, money moved over after returning and becoming resident again might be a different matter)
    If you have HK$600k in an "investment" (UK doesnt know what is MPF), leave it for 10 years, sell that investment for $900k, then in that 10th year you have a $300k capital gain. Honestly I dont know UK tax system well enough to know how that gain is treated, but it should still be declared. I think in some countries (not sure about UK), they have allowances for overseas retirement schemes, so you can specifically declare this as a retirement scheme and then it could be exempt or treated differently.

    The other point sounds right to me. If you are living and working in HK, not UK tax resident, then all your income and investments in HK are not subject to any UK taxes. Only the day you set foot back in UK, then thats the day you have to start paying UK taxes on your HK income and investments. If you simply have HK$600k in a HK bank account and transfer it to UK, there is no tax issue here at all. But if you have a $600k in a HK MPF account and it grows by $30k/year, then its this growth that technically the UK would be interested in taxing.

    I have to declare I'm not a tax guy and theres a million loopholes that change every year, so professional advice should be sought

  9. #9

    Join Date
    Jan 2009
    Posts
    35

    Does anyone happen to know whether switching funds in MPF before retuening helps. (ie I invested funds at $1000 ten years ago, now they are worth $10000, then I switch this $ 10000, into a different MPF fund at $10000. When I then return to the UK, the new funds are.the same $10000 that I paid for.them.so no capital.gains?).


  10. #10

    Join Date
    Jan 2009
    Posts
    35

    Alternatively, would switching MPF provider count as a reset? Ie I take my $10000 and invest with new MPF provider. When HMRC ask I can show my latest investment amount for this provider, not the investment from the previous provider 10 years ago.