GaryC

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Everything posted by GaryC

  1. Pension Refund in Germany: Can you get it?

    Perhaps I read that too quickly but it doesn't say anything about post December 2020 periods.  As I understand it, the Trade Agreement signed at the last minute deals with that situation and things stay pretty much the same for at least the next 15 years but you'll have to go and read that if it applies to you.  
  2. Pension Refund in Germany: Can you get it?

    Re Brexit, my understanding is that the answer is "no" because the EU regulations on the coordination of social security systems continue to apply. You will continue to receive 2 pensions - one from the UK and one from Germany.
  3. German Pension Question

    If you are British and have a National Insurance record (starts from the tax year in which you turn 16) and as you were in Germany pre-Brexit you should be covered by the Withdrawal Agreement meaning the EU rules on the coordination of social security systems continue to apply to you.  You can therefore claim a pension from German when the time comes based broadly on your German contribution years and one from the UK based on your contributions there.  Each country applies the EU rule to aggregate years from all countries and to pay you a pro-rata pension based broadly on your qualifying years in their country.  There are loads of threads on here about that.   The DRV will probably suggest doing a Kontenklaerung and recording your UK years onto their records (this is separate from the EU rules).  This can be beneficial, even in connection with the EU rules applying when you come to claim.  But if your German years (German contributions plus any UK years accredited through the Kontenklaerung) are less than 5, the EU aggregation and pro-rata rules will get you over that line, assuming you have some contribution record in other EU countries or the UK.   In the UK, the aggregation can get you past the required 10 years for a new State Pension if you end up with less than 10 UK years.   
  4. V0100 & V0410 Forms ?

    My first question would be, "Why would you not complete the forms?"  The DRV is wanting to do a Kontenklaerung by the looks of things to update your records with them, probably from when your National Insurance record started in the tax year in which you turned 16.  This will mean that from a German pension perspective, rather than the EU regulations about pensions when you move around the EU, you will get the correct years recognised and the rules properly applied to those years.  There is, so far as I am aware, no downside, other than the time it takes...
  5. Rental income calculation

    Thank you - as always.  Hopefully clarifies things for all those, like us, who enjoy leasehold investment properties...
  6. Rental income calculation

    Can I resurrect the question in this thread of UK leasehold v freehold in connection with a deduction under German tax law for property depreciation when calculating UK rental profit?  One for @PandaMunich?   In the UK, there are two ways to acquire an interest in residential property. One is freehold, where you own the land and the buildings situated on it, and the other is leasehold, where you have a legal agreement (lease) with the freeholder, which allows you to live in the property for a specified (annually reducing) number of years.  You own neither the land, nor the buildings, and pay ground rent to the freeholder each year.  That can range from a "peppercorn", i.e. £0, to £ a lot.  When you "sell" your leasehold house, you assign (transfer) the remaining period of the lease to the purchaser - you are not transferring land and buildings as you do not own them but don't worry, Stamp Duty Land Tax is still payable to HM Government.  If the lease expires then the freeholder recovers full access to the property and you walk away with nothing.  This is why the issue of "short" leases, i.e. those with less than a normal lifetime left on them is such a hot potato in the UK and why the government (allegedly) plans to outlaw "selling" new-build properties on lease - not that the Government have followed though on that commitment afaik...     Turning to German tax (UK taxable income for the Progressionsvorbehalt), as I understand it, if you own the freehold in a UK property that you rent out, then you would deduct 2% (post 1924 buildings) of the building costs (as a proportion of your purchase price) in calculating your UK rental profit under German tax law.  Let's not get bogged down in how the land would be valued for a UK property.    But what is the situation if all you have is a leasehold interest in that UK rental property, i.e. you do not own land or buildings and have paid your £200,000 for a contract (the lease)?  Is there any depreciation to deduct under German tax law? 
  7. TerryJoness, You'll want to talk with DWP International Pensions Centre first so they can confirm which years will benefit your pension, then with HMRC to agree whether you qualify to pay Class 2, or have to pay Class 3, and to then agree amounts and timeframes.  None of this is problematic but if you go straight to HMRC they will send you to DWP anyway...
  8. I am not sure what your issues are with this.  Pensions are income and on first principles are taxable - it matters not in which country you live.    In Germany, prior to 2005, pension contributions were paid out of taxed income and the pension was broadly tax-free (I am not up to speed with the way those rules worked but that is my broad understanding).  Since 2005, pension contributions are increasingly tax deductible and pensions are increasingly taxed on receipt (nachgelagerte Besteurerung).  Once the pension contributions are fully tax deductible and the pensions fully taxed the transition will be complete.  Whether, in the meantime, the transitional rules avoid double taxation (within the German tax system) has been the subject of a constitutional challenge and the Government is making changes to the rules as a result to speed up the transition, among other things.   Economists and policy advisers use a 3-letter acronym to describe systems of this sort.  T = taxed and E=exempt.  The first T/E relates to payments into the system; the second to growth within the system and the last to payments out.  In general, pensions policy is that growth in the value of the pension, or pension pot, should be tax-free.  So, a system where payments in are paid from taxed income, while payments out (and growth) are tax-free, would be TEE.  Where payments in are tax deductible, growth tax-free and payments out taxed, you have EET.    If you had a system where payments in are tax deductible, growth tax-free and payments out tax-free, which is what you are suggesting when you say that it is unfair because first they tax your salary and then they tax the pension, you would have EEE and there would be no tax in the system at all.  While taxpayers may jump for joy (until they want a better police force, fire service or education system etc.), no Government would sanction that sort of system...   In terms of taxation, if you are resident in the UK, the UK has taxing rights over your worldwide income, including any German pensions.  Similarly, if you are resident in Germany, they have taxing rights over your worldwide income, including UK pensions.  The Double Tax Treaty then decides who get the taxing rights over income arising in the country of non-residence to ensure it is not doubly taxed.  In the UK/German tax treaty, Article 17 deals with pensions (Article 18 for Government service pensions) and awards taxing rights over the state pension to the paying country.   So, if you have a German state pension but live in the UK, Germany retains taxing rights but the pension is not taxable in the UK.  In this scenario Germany taxes only your German-source income (limited tax liability) but does not allow you to claim any allowances, so every Euro is taxed.  There is an exception to this where either, at least 90% of your taxable income arises in Germany OR your non-German income is less than the German personal allowance.  In such cases you can elect to be treated as though you are tax resident in Germany.  This is what is often called a tax fiction because you are still taxed only on your German-source income but you can claim the personal and other allowances as if you were tax resident.  The quid-pro-quo to this is that you must also apply the Progression rules, so must include your UK-source income in your tax return so that the rate at which you pay tax in Germany is based on your worldwide income.  But the choice is yours.   Also, as a UK resident, if you have a small to average German pension along with income taxable in the UK, you will probably still be better off having the pension taxed in Germany on a limited liability basis, as the starting rates of tax in Germany are below the basic 20% in the UK. Not much but "every little helps"...   The final point to note is that if you are already drawing your German state pension an element of it is tax-free given the transition to taxing pensions on the way out.  That amount is fixed as a percentage of your first full 12 months of pension, which means it does not increase annually with inflation and will explain to some extent why your tax bill increases each year by more than just the tax on the annual pension increase.    So, you have taxable income in retirement which is taxed in one country or the other but not both...
  9. Cost of living crisis

    Indeed.  I had about £10k floating around from memory but he literally took any cash advance he could, stuck it in the back and then moved that debt.  Similarly with his monthly shopping. Stuck it on the card, then put the money in the bank and moved the debt.  Took a year to get to his magic total.   Also in those days, Tesco would take any coupons from any shop as long as you had no more than £10 face value of any one coupon.  Some other supermarket was drowning its selves in various £1 coupons free to those with empty pockets.  Sort them into £10 bundles and off to Tesco it was.  It was like finding the pot of gold at the end of the rainbow.  He was a specialist in that one too, with a house full of non-perishable items.  I had fun too but did not have as much space as him, so had to be more selective, lol 
  10. Cost of living crisis

      I remember that too.  A former colleague of mine, now sadly deceased, had about £250,000 circulating on such cards and the same amount in the bank earning interest.  I think he had something like 50 cards and her reckoned it took him an hour a month to move all the funds.  With interest rates at the time he was earning something like £500 per month...    
  11. Cost of living crisis

      Based on my experience, I think you will probably find yourself in a significant minority.  Many people just turn off when numbers come into the discussion and if one even utters the word "spreadsheet", they are "out the door"...
  12. Cost of living crisis

    Welcome to what was pretty normal until the mid 1990s.  Hands up those who remember 16.5% mortgage interest rates in the UK - me, me, me!!!  
  13. When they do the zwischenstaatliche Berechnung they use your actual German Entgeltpunkte, create an average therefrom for your German years and apply that to the years they bring in from the UK.  All things being equal the answer would be a lemon but it is not always the case.    For me, the answer was a lemon, i.e. create an average points per year, apply that to the UK years and then pro-rate the answer back to the German years.  All I gained was the ability to claim at 63 as the UK and German Wartezeit added together exceeded 35 years.  But for my wife the answer was far from being a lemon and her pension comes out about 20% higher than using the German years alone.  I am not sure why but I think it is because my career was school - uni - employed in Germany - employed in UK - retire, whereas my wife had school - further education - employed in Germany - unemployed in Germany - re-training in UK - unemployed in UK - employed in UK - self-employed in UK - employed in UK - retire.  I think that more complex mix of employment/unemployment and re-training and the way Germany allocates points for non-working periods is what made the difference but who cares...   If you are interested in fathoming all of this, you could read the DRV training material "Studientext Nr. 30 - Über- und zwischenstaatliches Recht, Auslandsrenten"  https://www.deutsche-rentenversicherung.de/SharedDocs/Downloads/DE/Fachliteratur_Kommentare_Gesetzestexte/Studientexte/Knappschaftsrecht/30_ueber_und_zwischenstaatliches_recht.pdf?__blob=publicationFile&v=3.   Somewhere in there it covers that fact that although, on the face of it the inner and zwischenstaatliche Berecgnungen should come out the same, that is not a given.  Indeed, the difference can be substantial and staff should always perform both parts of the calculation.  I assume the computers just do it...   If you are even more interested, there is a whole series of these texts (40 in total) that will tell you all you never knew you didn't want to know about the DRV. They are listed at the end of Nr.30, above, but for my sins I got entwined in numbers 15, 16, and 18-22, oh dear.
  14.   The future is hard to predict but one must also be mindful of the time limits for paying UK voluntary NIC.  If there is a realistic probability of returning to the UK and having to pay mandatory NIC for sufficient years to get the max possible pension then I would agree that waiting is something to consider but for every year paid "late" the price increases to that of the year of payment and of course, as of next year, the normal "max 6 years in arrears" rule returns.   The key is to ensure one has the best mix of cost (overall), maxing out the UK position and maxing out on adding Wartezeit to the German system with those UK years and that of course is different for each person's circumstances, but to obtain the maximum benefits from each country's rules, I think overlaps are inevitable.   You have 50 (soon to be 51) years during which you are allowed to pay UK NIC or gain NIC credits, out of which you need (in simple terms) 35 full years to get the full state pension.  In Germany you need 35 years Wartezeit to claim the pension for long service at 63, reduced by 3.6% per year for taking it early.  You need 45 years to claim the exceptionally long service version 3 years early (in simple terms), without reduction.  Your UK years (that don't overlap) contribute to that and depending on how your life panned out, those UK years may also increase the German pension (a fortuitous happenchance in my opinion).  Time for a spreadsheet, calculator, to work out what is best for you, lol...
  15.   Thanks - I had landed on §10 but not on H10.5, so most helpful. I'll pass on the relevant links.
  16. Have a read of Booklet NI 38.  It explains who can pay Class 2.  I would then have a chat with DWP Future Pensions Centre to answer some of your questions.   The reason for wanting to know your starting amount is that for each year you pay (whether mandatory or voluntary contributions for 2016/17 onwards adds £5.29 to your starting amount, up to the max of £185.15 per week (subject of course to the point above about "protected payments").  When I asked DWP to explain my starting amount, how it was calculated and the link with the max I could get they were more than pleased to do so.
  17.   Someone resident in Germany asked me the other day whether Brexit had changed the position about claiming a deduction in Germany for NIC payments as people in some forum they were reading were most confused and couldn't seem to get an answer from the FA (perhaps the latter is normal as it is seen as giving tax advice?).  I said I didn't think Brexit had changed anything, not least because your posts on this post-date the end of transition but am not sure exactly where the eligibility criteria are set out.  Can you point me/us/them to the appropriate statutory provision?  
  18.   I am not sure I follow this post.  Overlapping periods are indeed ignored, i.e. if you have contributions in Germany and the UK for the same period then the UK contributions are ignored but I do not follow the point about series and parallel.  The Germans will do 2 calculations under the EU rules on the coordination of social security systems. 1. they calculate what you would receive based solely on your German contribution record (the innerstaatliche Berechnung) 2. they calculate what you would receive if all contribution periods had been made in Germany (this is where overlaps are ignored).  This is the "theoretical amount" and is then pro-rated based on the ration of your German years to the total number of years (the zwischenstaatlice Berechnung)   Your pension in Germany is the higher of those 2 calculations.  From personal experience, the second one can be significantly higher.  Also, if you have less than 35 or 45 years in Germany to claim the 35-year or 45-year version of their pension then the UK years used in 2. can get you to the magic 35 or 45 to qualify.   So, I do not understand why paying German contributions would mean one should hold off paying into the UK system - there is no detrimental link as far as I am aware.
  19. Is my UK pension taxable in Germany

    There is a lot to unpack in this question.   First doing a Kontenklärung with the DRV so that they include the UK years as appropriate in the innerstaatliche Berechnung of the German State pension may prove beneficial.  Second, assuming you fall under the Brexit Withdrawal Agreement, then Germany will perform a zwischenstaatlich Berechnng of its pension by assuming all your British and German years were undertaken in Germany and then pro-rating the pension that falls out to your actual German years.  That could increase the German pension.   Then there is the question of the UK state pension.  You should have a "Starting Amount" for the new State Pension at April 2016, following which you add 1/35 x max state pension for each full qualifying year you have paid or been credited after 5 April 2016.  You may still be able to buy years from 2006/7 onwards by paying either class 2 or class 3 voluntary NIC in the UK.  For each year you buy you add the same 1/35 x max weekly amount to your UK pension and those voluntary years also feed into the German calculations.  You have until 5 April 2023 to buy those very old years. After that you can only buy up to 6 tax years in arrears.  If you can pay class 2 then payback is about 8 months into claiming the state pension so something of a no-brainer is you have the £160 or so available for each year you want to buy.  If you have to pay class 3 then payback is about 3 years as each years costs about £825 but still a good investment if you can afford it and don't plan on pegging it within 3 years of reaching state pension age, gasp!   Your UK State Pension is taxable only in the UK but will feed into the Progressionsvorbehalt in Germany to set the rate at which you pay tax.  If the UK and German pensions together take you over the Grundfreibetrag then you would pay tax on some of your German pension.  If you are a UK or EEA citizen you can claim the UK personal tax allowance meaning you would not have to pay tax in the UK if your total UK taxable income is less than £12,570.   The NHS pension is considered to be a Government Service pension for double tax treaty purposes  INTM343040 - DT claims and applications - Types of income: Pensions and Annuities - HMRC internal manual - GOV.UK (www.gov.uk) - see Note 1 which sets out the special case for NHS pensions and the UK/German tax treaty. This means that it is taxable only in the UK unless you have German citizenship (even if that is by dual citizenship), in which case it is taxable in Germany.  If it is taxable in the UK, it too feeds into the Progressionsvoorbehalt.   If I were to hazard a guess then at 1,000€ plus about 590€ NHS pension plus ? UK state pension, say £50 per week (equivalent to only 10 or so UK qualifying years), so 59€ per week, or 256€ per month, the income feeding into progression would be about 22,150€ per annum, so above the married Grundfreibetrag meaning some tax would be payable on your German pension.  Using those figures your UK income would be below the personal allowance, so no tax would be due but if you had the max UK state pension of about £9,600 per year, then with £6,000 from the NHS you would have to pay tax on about £3,000, so £600...     I'll leave others to comment on ongoing German employment...
  20. Filing a tax return - help on how to file

    Looks interesting but does not, in my view, make the letting business a trading activity.  As I would see it, either the properties were part of the trading stock of his business and "sold" as a trade sale when complete, which I doubt you would wish to claim as "he" would then suffer Income Tax and NIC on the proceeds less costs - and probably still have the rental income under Part 3 as shown on HMRC's website - or he has used his expertise and ability to get good prices on materials to refurbish an investment property that will be subject to CGT on sale proceeds less costs, including the refurbishment costs, to the extent they are reflected in the property when sold.  Income will be rental income under Part 3.
  21. Filing a tax return - help on how to file

    WOW - don't you just love international tax!    What I take from all this is that the least worst outcome seems to be that tax relief may have been overclaimed on the pension contributions post 2007 or post 2012 or 2013 if the 5-year rule applies.    From the taxation of the pension perspective I would assume that the 15 years would still be met as the tax relief that would potentially be clawed back relates to years after the magic 15 - Article 17(3) refers to "the" tax relief being withdrawn, which I would refer back to the 15 years of tax relief required but whether the Competent Authorities in the UK and Germany would view it that way is a good question.     I have lost track of what income was received in each year since 2014 and am too lazy to scroll back up the thread but presumably, once the letter from the Pru is obtained, that would leave the German tax return position being to return the small amounts of UK interest, return the UK pensions as appropriate for the Progresionsvorbehalt and return any property disposals for Progression to the extent that they were owned for less than 10 years.  Not that a lot of tax would arise on that interest, even if the effective rate was 40%+.    Quite how HMRC will view the over-claimed tax relief (assuming the Pru has continued to claim it) and what impact that would have on the amount of pension payable will drop out as things develop...   What a mess.
  22. Filing a tax return - help on how to file

    This gets more and more complicated.    Whether you submit a UK tax return, or plough the profit back into property, are not, I think, in this context, determining factors.  As I read it, you must be a "relevant UK individual" and have "relevant UK earnings".  Earnings that would fall within that definition but which are not taxable in the UK by virtue of a DTA are not "relevant UK earnings". Rental income is not "relevant UK earnings".    I don't think the trading question you mention is relevant either.  Whether the activities of a person amount to a trade that includes the receipt of rental income is one that would turn on its own facts but let's just say the bar is high as income from property is, per se, not trading income, so you need something which makes that income subordinate to the income from the other activities.  And, if you are seen to be carrying on a trade then you would be liable for Class 2 & 4 NIC, which you may or may not have been paying (mandatorily in relation to your trade as opposed to paying voluntary NIC as a non-resident to boost your pension).    Whether you then have "relevant UK earnings" is not wholly clear (to me).  Earnings from a trade are "relevant UK earnings", so long as they are not exempted from UK tax by a DTA, if they are chargeable under Part 2 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).  Income from property is chargeable under Part 3 of that Act, so is not relevant earnings. Whether being treated as carrying on a trade means that the property income becomes taxable under Part 2 ITTOIA is a good question.  I think it might but that is one for another day, sigh...  That said, there is a boundary rule which gives priority to the charge under Part 3 over that under Part 2.  The example there is of a property developer who temporarily lets some property before its sale.  That rent is chargeable under Part 3, even though there is an argument that it could be trading income under Part 2...   If the activities amount to a trade as previously described it would presumably still not be "relevant UK earnings".  This comes back to what Panda Munich has said about taxation of your worldwide income as a tax resident of Germany.  If your property activities amount to you carrying on a trade, the DTA would presumably award taxing rights to Germany (because it is looking at trading profits, not profits from immovable property) and the income would therefore not be "relevant UK earnings".    So, from the pensions tax relief perspective, it would seem that the profits arising from your UK properties are not "relevant UK earnings" whichever way you cut it and you therefore appear to qualify for tax relief on your contributions only under the 5-year rule.  You will of course want to draw your own conclusions on all of this but be mindful of running into the combined might of HMRC and the Finanzamt from an income tax/tax return perspective, as well as HMRC and the Pru in terms of pensions tax relief at source.  I do not envy you and if I am wrong about all of this then my apologies for setting hares running!   As far as "having should have" held the property(ies) in a corporate envelope, you may have fallen foul of ATED - the Annual Tax on Enveloped Dwellings, though it is a long time since I broke my brain reading those provisions and as you didn't do it, I will refrain from entertaining myself that way now too, lol.   Good luck
  23. Filing a tax return - help on how to file

    Sorry to add to your woes but when you write to the Pru you may open another can of worms unless you told them in 2007 that you were moving abroad.    This is not my area of expertise, so you will need to do further research, but as I understand it you can only retain tax relief on your UK pension contributions for up to 5 years after you became non resident and only if you fall within the meaning of "relevant UK individual".  I think you fall into that category because you were resident in the UK at some time during the five tax years immediately before the tax year in question and you were also resident in the UK when you joined the pension scheme. However, relief is limited to net contributions of £2,800 (£3,600 when the reclaimed tax relief is added to your pension pot).  This means that from ? 2012/13 or 2013/14 ? at the latest the Pru should no longer have been reclaiming the 20% basic rate tax on your behalf.  And if you did fall within the meaning of "relevant UK individual" then the reclaimed tax should have been restricted to £800 max per year for the 5 years after leaving the UK.  As I understand it, rental income (unless it is from certain furnished holiday lettings) is not taken into account when considering whether UK tax relief on pension contributions is available.    This may be a good starting point for your further reading...  Tax relief on member contributions (pruadviser.co.uk) PTM044100 - Contributions: tax relief for members: conditions - HMRC internal manual - GOV.UK (www.gov.uk)   If the Pru has been incorrectly reclaiming tax relief at 20% for some or all years from 2007 to 2022, the impact on your pension would be significant.    Pension tax relief is complex, so I hope I am wrong but I fear the worms are itching to get out of the can. 
  24. Filing a tax return - help on how to file

    That is not quite the right position to assert.  Article 17(3) overrides 17(1) to switch taxing rights back to the UK if, and only if, all of the conditions in 17(3) are met.  17(3) says:   "Notwithstanding the provisions of paragraph 1, such a pension ... arising in [the UK] which is attributable in whole or in part to contributions which, for more than 15 years in [the UK], a) did not form part of the taxable income from employment, or b) were tax-deductible, or c) were tax-relieved in some other way   shall be taxable only in [the UK].  This paragraph shall not apply if [the UK] does not effectively tax the pension ..., or if the tax relief was clawed back for any reason, or if the 15 year condition is fulfilled in both Contracting States"   Given that you were were working for many years in Germany, without (I assume) taxable income in the UK against which the pension contributions were set, you may have a factual challenge in demonstrating that all conditions in 17(3) are met.  It matters not from which bank account the pension contributions were paid, or when you started drawing the pension...    You also mention that you have no capital income.  Is that correct remembering that bank interest falls under that heading?  
  25. I think this is related to the fact that the UK declined to remain part of the EU Passporting of Financial Products system as part of the Withdrawal Agreement negotiations.  This means they cannot operate in EU countries without obtaining Financial Regulator accreditation in each and every country in which they choose to operate. While they may do that for commercial operations, I doubt it is seen as cost effective for the few expats who want to keep a UK bank account.  But I may be wrong and there may be a different reason, hmm...