 | Terry Baucher of Baucher Consulting is a well-regarded tax specialist, whom we regularly recommend to clients. In this guest blog, Terry shares some insights, and highlights a few of the important differences between the tax regimes in the UK and NZ. First, and this is not always as obvious as you might think, New Zealand’s tax system is very different from that of the UK. For starters, there is no tax-free personal allowance, so every dollar of income is taxed. |
Secondly, although there is no formal capital gains tax in New Zealand, almost all capital gains are taxable in one form or another. This is particularly relevant for the taxation of investments, the rules for which are highly unusual. A key point to remember is that your taxable income can often exceed the cash receipts from dividends.
Thirdly, if you file a tax return in the UK the double tax agreement between New Zealand and the UK does NOT mean you do not have to file a tax return in New Zealand. If you are a New Zealand tax resident, and if you are required to file a tax return then you MUST include all your worldwide income. The only exception is if you qualify for the "transitional resident’s exemption".
The transitional resident’s exemption usually lasts for 48 months after the month in which you become a New Zealand tax resident. However, you can lose it if you apply for any benefits such as working for families, even if your application is rejected. In several cases we have dealt with significant tax charges arose on pension transfers after an application for working for families resulted in the premature termination of the transitional resident’s exemption. The tax paid far outweighed the working for families’ credits paid. Be sure to carefully check the implications of making a claim for benefits. Please note you CAN claim paid parental leave and still keep your transitional resident’s exemption.
Fourthly, if you have started to receive a pension from Britain it IS covered by the transitional resident’s exemption. Furthermore, on the basis that you are a New Zealand tax resident then the UK has no right to tax your pension. Accordingly, you should apply for a "NT" (no tax) tax code for any pensions you may receive.
Finally, unless you do so within the first four years of immigrating to New Zealand, transfers of pension schemes to New Zealand ARE taxable. This includes the 25% portion you can receive tax free in the UK. Tax can be payable even if you can’t access the pension scheme after transfer. We know from our experience and discussions with Inland Revenue that the complex tax treatment means there is widespread non-compliance in this area. Be aware that Inland Revenue regularly requests details of transfers from pension transfer companies and can also obtain information from HM Revenue and Customs. It is therefore very important you obtain tax advice BEFORE initiating a transfer.
About the author:
Terry Baucher is a tax expert. His specialist areas of interest include cross-border tax, FBT, Inland Revenue audits and the sale and purchase of business assets. His book “Tax and Fairness” co-authored with Deborah Russell, MP published in May 2017. He has a track record of using FOI requests to deepen his understanding of tax law implementation. He makes regular presentations at seminars and contributes a regular column on current tax issues at Interest.co.nz and is frequently cited in the press. Terry’s professional memberships include the Accountants and Tax Agents Institute of New Zealand (ATAINZ). They represent SME business clients and make proactive representations to Inland Revenue regarding tax legislation that affects business owners. He is also a member of the British Chartered Institute of Taxation (BCIT) and the Society of Trust and Estate Practitioners (STEP).
To find out more about any of the tax issues raised in this blog post, please contact Terry on (09) 486 2600 or e-mail terry@baucher.tax.
23rd August 2018
Thirdly, if you file a tax return in the UK the double tax agreement between New Zealand and the UK does NOT mean you do not have to file a tax return in New Zealand. If you are a New Zealand tax resident, and if you are required to file a tax return then you MUST include all your worldwide income. The only exception is if you qualify for the "transitional resident’s exemption".
The transitional resident’s exemption usually lasts for 48 months after the month in which you become a New Zealand tax resident. However, you can lose it if you apply for any benefits such as working for families, even if your application is rejected. In several cases we have dealt with significant tax charges arose on pension transfers after an application for working for families resulted in the premature termination of the transitional resident’s exemption. The tax paid far outweighed the working for families’ credits paid. Be sure to carefully check the implications of making a claim for benefits. Please note you CAN claim paid parental leave and still keep your transitional resident’s exemption.
Fourthly, if you have started to receive a pension from Britain it IS covered by the transitional resident’s exemption. Furthermore, on the basis that you are a New Zealand tax resident then the UK has no right to tax your pension. Accordingly, you should apply for a "NT" (no tax) tax code for any pensions you may receive.
Finally, unless you do so within the first four years of immigrating to New Zealand, transfers of pension schemes to New Zealand ARE taxable. This includes the 25% portion you can receive tax free in the UK. Tax can be payable even if you can’t access the pension scheme after transfer. We know from our experience and discussions with Inland Revenue that the complex tax treatment means there is widespread non-compliance in this area. Be aware that Inland Revenue regularly requests details of transfers from pension transfer companies and can also obtain information from HM Revenue and Customs. It is therefore very important you obtain tax advice BEFORE initiating a transfer.
About the author:
Terry Baucher is a tax expert. His specialist areas of interest include cross-border tax, FBT, Inland Revenue audits and the sale and purchase of business assets. His book “Tax and Fairness” co-authored with Deborah Russell, MP published in May 2017. He has a track record of using FOI requests to deepen his understanding of tax law implementation. He makes regular presentations at seminars and contributes a regular column on current tax issues at Interest.co.nz and is frequently cited in the press. Terry’s professional memberships include the Accountants and Tax Agents Institute of New Zealand (ATAINZ). They represent SME business clients and make proactive representations to Inland Revenue regarding tax legislation that affects business owners. He is also a member of the British Chartered Institute of Taxation (BCIT) and the Society of Trust and Estate Practitioners (STEP).
To find out more about any of the tax issues raised in this blog post, please contact Terry on (09) 486 2600 or e-mail terry@baucher.tax.
23rd August 2018
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