Taxation (International and Other Provisions) Act 2010 section 130A

Interpreting provision about UK taxation of pensions etc.

Section 130A limits the protection that double taxation agreements give to certain foreign pensions paid to UK residents, specifically where those pensions arise from transfers that were part of a tax avoidance scheme.

• Where a double taxation agreement exempts foreign pensions paid to UK residents from UK tax, that exemption does not apply if the pension derives from a transfer of funds between pension schemes that formed part of a tax avoidance arrangement.
• A "relevant transfer" is a transaction or series of transactions that moves sums or assets out of one pension scheme and into the scheme that pays the pension in question, including any assets derived from the original transferred funds.
• A scheme counts as a "tax avoidance scheme" if one of the main purposes of any party entering into it was to secure an income tax advantage for any person by exploiting the pension exemption in a double taxation agreement — regardless of whether the agreement existed at the time the scheme was entered into.
• Even where UK tax is charged under this provision, the taxpayer can still claim double taxation relief by way of credit for any foreign tax paid on the same income.