Avoiding Tax on UK pension for Tax Nomad with no tax residency

Tax and legal
1

Have been working in the Middle East for the last 4 years and will retire soon. Although I maintain a home in the UK I also have access to an alternative residence in the US. I will pass the 2nd Automatic test for being non-resident for tax purposes in the UK (ie Was not tax resident for last 3 years and will spend no longer than 46 days in the UK in subsequent years).

I have no UK sourced income and have the option of drawing a UK defined benefit pension which will pay around 24K GBP a year (I am too young for state pension so not a consideration at this stage).

I will spend the year and possibly multiple years travelling so will not establish tax residency anywhere (and the UK does not require me to have tax residency).

In order to avoid paying UK tax on my pension I believe I need to provide a tax residence certificate (from a foreign country) to HMRC. Is there a way to do this “relatively” cheaply. I can get a residence visa in the UAE for maybe 2K GBP (many companies will put you on their books (just to allow you to get a residence visa) but not require you to do anything) but a Tax residency certificate from the UAE requires me to stay there for 180 days + which is not going to happen.

Is there anywhere else where I can obtain a residency visa which has relatively low cost but does not require you to stay there for maybe longer than a month ?

The above assumes I need to provide a tax residency certificate to HMRC with a country that has a double taxation treaty (and has a much lower tax rate than the UK). However, if anyone knows of a way around this and HMRC will just accept that I am non-resident for tax purposes then that would be great too (although highly unrealistic!)

2

Why would you want a DTA specifically?
Is it not enough that the UK should recognize your foreign tax residency and hence dis-apply any UK tax?

4

If you haven’t already, why don’t you claim UK residence for one year, draw your 25% lump sum tax free (invest that tax free overseas) then draw a smaller ongoing annual pension.

UK pension are classed as “UK sourced income” because you got a UK tax rebate on contributions ( also UK sourced is property rental income but not bank interest ) can only be avoided by transferring the pension overseas or claiming overseas tax rights under a DTA (like Portugal NHR).

You don’t need a certificate in advance you can claim a rebate in arrears, but you still need to confirm the DTA you are claiming protection under.

5

Pension payments count as UK sourced income which is subject to UK tax even if I am non-resident for tax purposes

6

I dont want or need my pension yet and there are lots of pro’s and cons about taking the lump sum depending on prevailing conditions (+ I may well want to return to the UK permanently in the future). Therefore a tax residency certificate from a low taxation country with a DTA with the UK is what I am after - so long as the stay requirements are low (so UAE no good as you need to stay 180 days + to get a tax residency cert)

7

Well, I know at least two countries with practically no stay requirements for residence. One of them has a DTA with the UK but will want to tax your global income. The other has no DTA but does not tax foreign income. Take your pick :slight_smile: