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50% UK tax on payment from ex-employer in Germany

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Posted

Hi all

 

By way of background, I returned to the UK last September after working for a German company from March 2005 until March 2011. On leaving the company I was entitled to a refund of pension contributions, which were subsequently paid into my UK bank account and amounted to approximately £6500. Since the payment was not taxed in Germany, I have declared it to the UK inland revenue as a refund of pension contributions from an overseas pension scheme, via the self assessment system. I'm shocked to see that the system has come up with a figure of tax payable equal to 50% of my refund. This seems grossly excessive to me and so my question to experienced people is, can this be correct? And if so, how is this justified?

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Posted

ok, since there are no replies, does anyone know how much tax I would have paid in Germany on the refund of pension contributions?

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Posted

Direktversicherung from before 2005: 21.1%

Direktversicherung started after 1.1.2005: your personal income tax rate, enter total yearly income incl. pension payout: http://www.parmentier.de/steuer/steuer.htm?incometax.htm

 

Details: http://www.finanztip.de/tip/finanzen/direktversicherung.htm

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Posted

I would query it with the HMRC, http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=hpkspulskxM .

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Posted

Thanks for the replies.

 

I have more information which might help someone give me advice as to how I should declare this income in the UK:

 

The payment in question was called "betrieblicher Versorgungsbezug" and amounted to 7.860€. The "Lohnsteuerbescheinigung für 2012" which was sent to me by my employer after I left the company (and also to the German Finanzamt) classified the payment as "Steuerfreier Arbeitslohn nach Doppelbesteuerungsabkommen".

 

The UK tax authorities have not been able to help me except to say that I need to find out what this payment was and enter it as such on my tax return - and this is where I'm lost! I'm inclined to enter it as employment income, in which case I'll be taxed at 20% (or thereabouts), instead of the 50% mentioned in my original post. I intend to contact my ex-employer in Germany for help but they're not back until the new year. Since I need to pay the tax (however much it is) by 31st of January, I'm hoping I can get some help and/or advice here.

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Posted

Sorry, but that sounds like a Direktversicherung (= life insurance paid for by your employer) that you wanted to get paid out in a lump payment instead of waiting to get a monthly pension from it and now you will have to tax it.

 

If you had remained resident in Germany, you would also have had to pay social security contributions on it, for details please see this article, so maybe count your blessings?

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Posted

I'm more confused than ever :blink:

 

I realise that I need to pay tax on the payment in the UK but what am I paying tax on, that's my question? Is the payment classed as a refund of pension contributions, or what? If my former employer is unable to help me then I'll just declare the payment as employment income, I think and be taxed at 20% instead of 50%

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