Mr Bob Shah
29 Bedford Road
Moor Park
Middlesex
HA6 2AY
									5 June 2007					

Dear Bob,

PZK Executive Pension Scheme

Please find enclosed a copy of my letter dated 6 March for your records. This letter is a follow up to our original meeting in which you requested for me to advise BW that you wanted to continue the scheme without a Pensioneer Trustee, with you and Praful being sole signatory to your investments. 

I have drafted the new deed and rules for your scheme, this will follow in tonight’s post. In essence this deed continues the scheme under the new rules without an independent trustee being party to the scheme. When you meet with Trevor, may I suggest that you take the deed of removal with you and arrange for them to sign this as the outgoing trustee – this will then give closure to the matter.

The two items you asked me to look into on your behalf whilst you were away have been concluded. Namely, a lower tax rate on the pension soon to be in payment and investing in residential property overseas.

At this time you are UK resident and as such you are taxed on your worldwide income here in the UK. In order for you to receive your pension without deduction of UK tax on the income you have to become non-UK resident. We spoke of the pension systems where there was a reciprocal tax agreement with the UK and two countries which have a lower tax rate on pension income include the Channel Islands and S. Cyprus. In order for you to have your pension paid there and tax paid at the local rate you have to take residency in the chosen country; this includes purchasing a property and spending a minimum number of days per annum to qualify. I suspect that spending a couple of months of the year in those countries, other than a two week holiday is not appealing to you. The other options we spoke about included transferring your pension to Australia, this will not necessarily give you a lower tax burden. Obtaining information on the pension system in India has been difficult and they have no comparable scheme over there. However, you pension can be paid gross and deducted at the local tax rate in India, but again the rules on residency applies for HMRC to allow this.

HMRC are most unwilling to allow pensions to be paid gross unless there is a reciprocal tax agreement which allows pensions to be taxed/untaxed in the country with a reciprocal tax agreement.

With regard to residential property, your scheme cannot hold this directly or indirectly. The only way for investment in residential property would be a loan to a Company that adhered to the scheme. The loan would be on commercial terms and secured against the property, the loan amount could be 50% of the net value of your scheme, with interest and capital repaid to the Company from the scheme on the future sale of the property. An Investment Company could be established for this purpose. The loan could be used as the Company chooses, this includes a loan to you from the business. This route is the only practical option available to you for investment in residential property that does not create a tax consequence on the scheme. It should be noted that in making a loan in this manner, it must be considered prudent, secure and commercially sound. 

Also, I am advised that interest loan repayments made in India may not necessarily be wholly tax deductible in the UK, it very much depends upon whether your UK tax returns includes any income derived from India. I have asked Daniel to clarify the tax position for you in this regard.

I trust that this brings everything up to date, if you have any questions call me at the Office or on my mobile – 0776 9685652.

Kind regards

Yours sincerely

Gavin McCloskey
For Pension Practitioner .Com