HMRC must lift its block on French and Italians in the UK transferring their pension pots tax free, or risk losing the benefits their professional expertise brings to construction
I didn’t want to write another article relating to Brexit, many others have covered the subject thoroughly enough it seemed. But when I heard that HM Revenue & Customs has effectively blocked French and Italian expatriates working in the UK from taking their pensions with them tax free when they move home, I felt compelled to speak out.
This is just the kind of unnecessary measure that threatens to exacerbate the desperate skills shortage the construction industry already faces, by putting off the skilled EU labour we rely on so heavily just at a time when the UK should be appearing open.
So what exactly is happening? Essentially, according to a report in the Financial Times, HM Revenue & Customs (HMRC) has removed all French and Italian pension schemes from its list of international schemes said to meet the conditions for accepting UK retirement pots. This means pension savings built up in the UK that are transferred into schemes abroad and don’t meet HMRC’s approval will be liable for UK tax charges. These taxes can add up to almost half the total value of an individual’s pension pot.
Apparently the move is because HMRC is concerned about pension money moving out of the UK into offshore schemes. In particular HMRC is thought to be worried about these off shore schemes because they allow cash, which has had UK tax relief, to be taken before the age of 55.
This is just the kind of unnecessary measure that threatens to exacerbate the desperate skills shortage the construction industry already faces
But the move could end up costing HMRC and the UK construction industry much more in lost tax revenues in the end. I also question whether HMRC can really quantify how much money is flowing into offshore pension schemes. After all, nobody seemed to feel a measure like this was necessary before.
Whatever arguments are put forward by either the so called Remainers or Brexiteers, we can be almost certain the UK will remain open to highly skilled labour whether or not we remain in the single market. The need for professionals such as engineers in the UK is so great that any measures making it tough for them to work here visa wise are unlikely. And this is because we need them.
According to industry figures published in The Guardian the construction industry employs 324,000 fewer workers than it did in 2008, when the financial crisis led to a slump in construction projects, prompting companies to cut their workforces. Across the UK, nearly 12% of the 2.1 million construction workers come from abroad, and mainly from the EU. Experts suspect the actual number is even higher. This suggests a squeeze on the labour market risks turning a shortage into a crisis.
It does make you ask then, why on earth is HMRC rolling out measures that will exacerbate what could already be a major problem? French and Italian staff in our offices, who despite being committed to working in the UK, have already voiced their concerns. The new measures also mean they feel compelled to opt out of their auto enrolment pension scheme as they could end up being taxed on half the money they pay in, reducing the overall employee benefit package they are entitled to receive.
We pride ourselves on delivering the highest possible service to our clients and our EU engineers are paramount to this. The government must prevent multiple issues like this, and other issues around Brexit, from combining to make the UK appear hostile to EU workers.
I strongly urge HMRC to lift the block on French and Italian expatriates from moving home with their pensions tax free. In the current climate, all of us in the construction industry need to be much more alert to these kinds of rule changes and prepared to speak out. We all know how long it can take to recruit the best, most highly skilled people and we should not put off the labour pools we recruit from to want to work in the UK especially if we want to offer a world leading service.
The best and the brightest, whatever country they come from should be embraced by HMRC, not taxed on their pensions when they decide to move home.
Claire Palmer is a director of London-based structural engineering consultancy Symmetrys