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Snowbound

Claiming Private UK Pension

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Hi all. 
I have a small private pension in the UK. Have just reached the age of 55 and thought I could claim the benefits as advised be Pension Wise UK. Have just tried and have been advised by my pension company that as I live overseas, my only option is to take the whole lot and pay huge tax (as opposed to tax free lump sum and monthly payments) My husband has been advised the same by his pension provider too. My question is: Has anyone managed to successfully claim the 25% tax free lump sum and monthly payments please? Thanks. 

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19 minutes ago, Snowbound said:

Hi all. 
I have a small private pension in the UK. Have just reached the age of 55 and thought I could claim the benefits as advised be Pension Wise UK. Have just tried and have been advised by my pension company that as I live overseas, my only option is to take the whole lot and pay huge tax (as opposed to tax free lump sum and monthly payments) My husband has been advised the same by his pension provider too. My question is: Has anyone managed to successfully claim the 25% tax free lump sum and monthly payments please? Thanks. 

That sounds like nonsense.  We have several  members who are receiving their British private pensions monthly in Australia.   I don't know if they were able to get the 25% tax-free lump sum (which will be taxable by Australia anyway so it's not really going to be tax-free -- something to think about). 

The problem may be that some providers can't pay the monthly pension into Australian bank accounts, they can only pay into a British bank account.  If you don't have a British bank account any more, then you can't open one from Australia.  However, I believe you can open one with a company like Wise, which will give you a British account number that the provider can use. 

I'd suggest contacting them again and telling them you want the monthly payments paid into a UK bank account, and see if that makes a difference to the answer. You're probably talking to someone in a call centre, not an expert, so they may be misunderstanding.  If you get nowhere, then you may need to engage an adviser like @Andrew from Vista Financial to sort them out.

Edited by Marisawright
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Thanks so much for your reply. We do have UK accounts still so am happy for it to be paid there. Thanks for your advice, I will call them back and try again!! 

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6 hours ago, Snowbound said:

Thanks so much for your reply. We do have UK accounts still so am happy for it to be paid there. Thanks for your advice, I will call them back and try again!! 

I'm sure you're aware that if you take your UK pension as an income stream and you're still working, then you'll be taxed on it in Australia at your marginal (highest) rate of tax. If you're planning to retire and you have a decent amount in your Aussie super, you could draw $18,200/annum from your UK pension until it's exhausted. As long you don't have any other income streams in the UK, you should be able to get that $18,200 tax-free because it's lower than the UK personal allowance (£12,570), hence no tax to pay in either the UK or Australia.

That's what I intend to do with my UK private pension, although I still intend to seek financial advice closer the time to ensure I've done my sums right!

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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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1 hour ago, InnerVoice said:

I'm sure you're aware that if you take your UK pension as an income stream and you're still working, then you'll be taxed on it in Australia at your marginal (highest) rate of tax. If you're planning to retire and you have a decent amount in your Aussie super, you could draw $18,200/annum from your UK pension until it's exhausted. As long you don't have any other income streams in the UK, you should be able to get that $18,200 tax-free because it's lower than the UK personal allowance (£12,570), hence no tax to pay in either the UK or Australia.

That's what I intend to do with my UK private pension, although I still intend to seek financial advice closer the time to ensure I've done my sums right!

Unfortunately, although the UK pension regulations allow it, not all UK pensions allow you to flexibly draw down like that. With some providers the only choices are taking the entire amount as a lump sum, or a pension or a 25% lump sum and a pension.

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Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia) www.kbfayers.com

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45 minutes ago, Ken said:

Unfortunately, although the UK pension regulations allow it, not all UK pensions allow you to flexibly draw down like that. With some providers the only choices are taking the entire amount as a lump sum, or a pension or a 25% lump sum and a pension.

Thanks @Ken, I will check this. If the only choice offered is to take the lump sum, are you still allowed to transfer your pension to a different UK provider before drawdown?


Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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2 hours ago, InnerVoice said:

Thanks @Ken, I will check this. If the only choice offered is to take the lump sum, are you still allowed to transfer your pension to a different UK provider before drawdown?

I think you're reading Ken's post wrong.  He's saying some providers will give you a choice of taking the lump sum OR a pension OR 25% + pension.

I think he's read your post as taking a lump sum each year, which isn't one of those options.  However I assumed you were taking it as a monthly pension totalling $18,200 per annum, which would be covered by one of those options. Is that what you meant?

Edited by Marisawright
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9 hours ago, Marisawright said:

I think you're reading Ken's post wrong.  He's saying some providers will give you a choice of taking the lump sum OR a pension OR 25% + pension.

I think he's read your post as taking a lump sum each year, which isn't one of those options.  However I assumed you were taking it as a monthly pension totalling $18,200 per annum, which would be covered by one of those options. Is that what you meant?

Yes - that! 😊


Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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16 hours ago, Marisawright said:

I think you're reading Ken's post wrong.  He's saying some providers will give you a choice of taking the lump sum OR a pension OR 25% + pension.

I think he's read your post as taking a lump sum each year, which isn't one of those options.  However I assumed you were taking it as a monthly pension totalling $18,200 per annum, which would be covered by one of those options. Is that what you meant?

 

6 hours ago, InnerVoice said:

Yes - that! 😊

If however you take it as a pension, you will receive that pension until you die, not "until exhausted". Unlike Super, pensions do not exhaust the fund, but instead the fund purchases an annuity which pays out for the rest of your life regardless of how long you live, whether you can afford an annuity that pays $18,200 will depend upon the size of your pension pot. Some pension funds will allow you to take as flexible lump sums (perhaps equivalent to say $18,200 each year) annually or monthly as it suits you, and that will be "until exhausted".

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19 hours ago, InnerVoice said:

Thanks @Ken, I will check this. If the only choice offered is to take the lump sum, are you still allowed to transfer your pension to a different UK provider before drawdown?

Sorry, I'm not up on the rules regarding transferring from one UK provider to another. Presumably it wouldn't be a taxable event as it's still locked up in a pension fund (same with consolidating your funds into one scheme) but I don't know for certain how the ATO looks at it.

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Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia) www.kbfayers.com

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3 hours ago, Ken said:

Sorry, I'm not up on the rules regarding transferring from one UK provider to another. Presumably it wouldn't be a taxable event as it's still locked up in a pension fund (same with consolidating your funds into one scheme) but I don't know for certain how the ATO looks at it.

Pension Wise says that some providers won't let you open a new account from overseas (which implies that some will, I suppose):

https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/moving-living-and-retiring-abroad

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3 hours ago, Ken said:

 

If however you take it as a pension, you will receive that pension until you die, not "until exhausted". Unlike Super, pensions do not exhaust the fund, but instead the fund purchases an annuity which pays out for the rest of your life regardless of how long you live, whether you can afford an annuity that pays $18,200 will depend upon the size of your pension pot. 

Interesting. I always wondered how private pension funds in the UK managed to be lifelong whereas superannuation is basically the same as any other savings you may have (except for the tax benefits).   

I wonder if UK pension funds are able to buy annuities at more advantageous rates?   I've looked into them and have trouble seeing the value in them.   

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3 hours ago, Ken said:

Sorry, I'm not up on the rules regarding transferring from one UK provider to another. Presumably it wouldn't be a taxable event as it's still locked up in a pension fund (same with consolidating your funds into one scheme) but I don't know for certain how the ATO looks at it.

Apologies for going off on a tangent.  But how would the ATO know about a person's UK financial activity?

I understand you probably have to answer questions about it on a tax return and it would be a crime to withhold the information and morally wrong etc.   But how would they actually know?    

I'm not suggesting anyone do anything wrong, I'm just curious.


British  | Lived in Australia 2001-02 on 457   | Married Aussie wife & moved back to UK | Plan to return to Sydney 2026 when all kids have finished school

5 Feb 2023 - 309/100 submitted | 14 Mar 2023 309 & 100 granted

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45 minutes ago, FirstWorldProblems said:

Apologies for going off on a tangent.  But how would the ATO know about a person's UK financial activity?

I understand you probably have to answer questions about it on a tax return and it would be a crime to withhold the information and morally wrong etc.   But how would they actually know?    

I'm not suggesting anyone do anything wrong, I'm just curious.

Just asking for a friend? 😉

They rely on you being honest and declaring all your income, but if your finances seem suspect they have the power to investigate you. Tax authorities in different jurisdictions can share information and they're getting a lot better at it, although to my knowledge the ATO can't access information about your UK finances directly. They'd need to obtain this via the HMRC.

Personally I'm very cautious about any information I provide to government organisations, as they're becoming increasingly less trustworthy in how that information is used. That doesn't mean to say that I would lie when asked to provide information, but I certainly don't provide anything they don't need to know.

Edited by InnerVoice
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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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56 minutes ago, FirstWorldProblems said:

Apologies for going off on a tangent.  But how would the ATO know about a person's UK financial activity?

I understand you probably have to answer questions about it on a tax return and it would be a crime to withhold the information and morally wrong etc.   But how would they actually know?    

I have no idea, but I think they are increasingly sharing information.  I always remember a member here, who had never declared the fact that he owned a rental property in the UK  It was a genuine mistake, he really thought income earned overseas was none of Australia's business. Somehow he got found out (I don't think even he knew how they did it), and when he posted here about it, he was facing a massive fine. 

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My husbands UK private pensions, are all index linked, and should he die before me, I still get a very generous amount until I die. I have my own state pension 

All our income comes from UK, we use tax agents who understand both UK and Australian tax, last year we paid all our tax in Australia, double taxation agreement.

Other details are too personal to discuss on a public forum

Edited by ramot
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On 18/07/2023 at 08:39, Snowbound said:

Hi all. 
I have a small private pension in the UK. Have just reached the age of 55 and thought I could claim the benefits as advised be Pension Wise UK. Have just tried and have been advised by my pension company that as I live overseas, my only option is to take the whole lot and pay huge tax (as opposed to tax free lump sum and monthly payments) My husband has been advised the same by his pension provider too. My question is: Has anyone managed to successfully claim the 25% tax free lump sum and monthly payments please? Thanks. 

Hi

This is actually not unusual nowadays, we are seeing this a fair bit with UK Pension providers in that if a member is an Australian Resident then the only option for them to take retirement benefits with that provider is to take the payment as a single payment under what is termed an uncrystallised funds pension lump sum (UFPLS)

https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-an-uncrystallised-funds-pension-lump-sum-ufpls

As this is classified as a lump sum payment from a HMRC perspective then it does not fall under the UK/AUS DTA meaing that the UK have taxing rights, the way the UK tax these payments is that there is a 25% tax free element and the remaining 75% is taxed at marginal tax rates although in the first instance tax is withheld at what they call emergency rates.

However any overpayment of tax can be reclaimed including the 0% personal allowance.

There will also be an assessment made by the ATO on the lump sum based on the growth of the pot typically since the member arrived in Australia however the tax that has been paid to HMRC will be acknowledged, this may mean that there will be a lower tax bill in Australia and even to the point of there being no tax bill.

 

On 18/07/2023 at 15:48, InnerVoice said:

I'm sure you're aware that if you take your UK pension as an income stream and you're still working, then you'll be taxed on it in Australia at your marginal (highest) rate of tax. If you're planning to retire and you have a decent amount in your Aussie super, you could draw $18,200/annum from your UK pension until it's exhausted. As long you don't have any other income streams in the UK, you should be able to get that $18,200 tax-free because it's lower than the UK personal allowance (£12,570), hence no tax to pay in either the UK or Australia.

That's what I intend to do with my UK private pension, although I still intend to seek financial advice closer the time to ensure I've done my sums right!

 

It is possible under UK rules and if the pension provider allows it (some still do) to instead of taking benefits under the UFPLS method take the benefits as flexi access Drawdown, with this method (if allowed by the provider) it is possible to take a Pension Commencement Lump Sum (PCLS) of up to 25% (UK tax free (not Australian tax free)) of the pot and the remainder can be drawn as and when required, typically a member will at the point of requiring an income make arrangements to have it paid monthly at a set amount, however the pot of money is still invested and so the pot may or may not exhaust depending on investment earnings along the way and amounts drawn. This is a similar arrangement to Australian Superannuation Account Based Pensions.

The money taken once in Drawdown is classified by HMRC as Pension Income and does fall under the UK/AUS DTA which means that Australia has taxing rights (assuming the member is an Australian permanent resident/citizen), so it is really irrelevant whether or not it is under or over the UK personal allowance.

However if the payments are periodic and it is elected to receive say $1,516 per month, then if the member has no other Australian income these payments will be in the OZ tax free threshold. That said typically there will be other taxable income in the mix if not immediately then at some future point ie UK State Pension and or Australian Age Pension so these State Pension are likely to take up the 0% allowance.

Once again though, it seems to be that more and more providers are not allowing the Drawdown method for Australian Residents (we actually came across a SIPP provider just the other day not allowing it).

 

On 18/07/2023 at 17:46, InnerVoice said:

Thanks @Ken, I will check this. If the only choice offered is to take the lump sum, are you still allowed to transfer your pension to a different UK provider before drawdown?

 

Under UK rules it is possible to transfer pension prior to Drawdown, however many UK pension providers will not allow Australian Residents to open a Pension with them, there are a few SIPP providers around that do allow it however a lot of these providers require the business to be done under Financial Advisers only.

Some private pensions may contain safe guarded benefits, this is where there is some form of guarantee attached (typically a promise of a higher Annuity Rate), with these Pensions if they are over the value of 30k GBP then (UK FCA) financial advice is required before a transfer can go ahead (and the advice may be for it not to go ahead).

Most people now similarly to here in Australia do not purchase Annuities with their Pension pots and instead access them via Flexi-Access Drawdown or UFPLS payments (be that a single lump sum or a series of payments) but usually if the UK pot is reasonable high the amounts taken will be gradual to manage tax liabilities.

This is of course where an Australian (QROPS) Super Fund should be considered as withdrawals are tax free over the age of 60, however of course investigation into the full individual circumstances will need to be considered to assess whether this is a better option or not.

 

Andy 🙂

  

Edited by Andrew from Vista Financial
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Andy Williams - andrew@vistafs.com.au 

Financial Adviser (FPA Member AFP ®) / Tax (Financial) Adviser (TPB)

SMSF Specialist Advisor™ (SSA™) / UK SIPP Authorised Adviser 

Specialising in UK Expat Retirement Planning Advice and Pension Transfers 

Director - Vista Financial Services – www.vistafs.com.au / 08 8381 7177

AR-322874 /AFSL-234951

 

Please note that my advice on this forum is general advice only and professional financial advice should be sought for your own personal situation.

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1 hour ago, ramot said:

My husbands UK private pensions, are all index linked, and should he die before me, I still get a very generous amount until I die. I have my own state pension 

All our income comes from UK, we use tax agents who understand both UK and Australian tax, last year we paid all our tax in Australia, double taxation agreement.

Other details are too personal to discuss on a public forum

I should add that my husband has been retired for 16 years, plus we were living in Australia on a temporary retirement  visa then, so rules claiming UK  pensions for Australian residents might be different. 

Edited by ramot
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On 19/07/2023 at 19:43, Andrew from Vista Financial said:

Most people now similarly to here in Australia do not purchase Annuities with their Pension pots and instead access them via Flexi-Access Drawdown or UFPLS payments (be that a single lump sum or a series of payments) but usually if the UK pot is reasonable high the amounts taken will be gradual to manage tax liabilities.

Andy 🙂

@Andrew from Vista Financial so does the ATO treat Flexi-Access Drawdown sums and UFPLS payments from UK pension funds differently, or are they both classed as a taxable income stream in the normal way? Many thanks in advance.


Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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Well from a HMRC perspective, lump sums are not covered under the DTA ie UFPLS meaning UK have taxing rights whereas pension income is covered under the DTA (for Perm/Ctizens) meaning Australia have taxing rights.

With the ATO, typically, foreign super (UK pensions) lump sums are assessed for tax on the Applicable Fund Earnings (AFE): https://www.ato.gov.au/individuals/super/foreign-super-funds/withdraw-a-lump-sum-directly-from-a-foreign-super-fund/

Whereas pension income is assessed for tax as income.

Whilst that seems straight forward there may be times where the ATO might view an income payment (under HMRC's eyes) as a lump sum payment and a lump sum payment (under HMRC's eyes) as an income payment. This comes down to the periodicity of the payment, here's some light reading for you: https://www.directdocs.com.au/ozstomember.html

 

Regards

Andy

Edited by Andrew from Vista Financial
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Andy Williams - andrew@vistafs.com.au 

Financial Adviser (FPA Member AFP ®) / Tax (Financial) Adviser (TPB)

SMSF Specialist Advisor™ (SSA™) / UK SIPP Authorised Adviser 

Specialising in UK Expat Retirement Planning Advice and Pension Transfers 

Director - Vista Financial Services – www.vistafs.com.au / 08 8381 7177

AR-322874 /AFSL-234951

 

Please note that my advice on this forum is general advice only and professional financial advice should be sought for your own personal situation.

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On 06/08/2023 at 18:33, Andrew from Vista Financial said:

Well from a HMRC perspective, lump sums are not covered under the DTA ie UFPLS meaning UK have taxing rights whereas pension income is covered under the DTA (for Perm/Ctizens) meaning Australia have taxing rights.

With the ATO, typically, foreign super (UK pensions) lump sums are assessed for tax on the Applicable Fund Earnings (AFE): https://www.ato.gov.au/individuals/super/foreign-super-funds/withdraw-a-lump-sum-directly-from-a-foreign-super-fund/

Whereas pension income is assessed for tax as income.

Whilst that seems straight forward there may be times where the ATO might view an income payment (under HMRC's eyes) as a lump sum payment and a lump sum payment (under HMRC's eyes) as an income payment. This comes down to the periodicity of the payment, here's some light reading for you: https://www.directdocs.com.au/ozstomember.html

Regards

Andy

@Andrew from Vista Financial thanks for this info - for some reason I missed your reply!

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Australian Citizen since 2007 | Returned to the UK between 2008-2011 | QLD resident for over 20 years

All advice and opinions I provide on PomsInOz are solely my own and are general in nature. I am not a migration agent, accountant, tax expert or financial adviser, and my insights are no substitute for professional advice. I strongly encourage you to seek the guidance of qualified professionals for specific concerns. I do not assume any responsibility for actions taken based on the information provided in any of my posts, and if you choose to act on this information then you do so entirely at your own risk.

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Thanks for all your replies. I put this to bed for a while as it was hurting my head! 🤣. BUT I do need to get this sorted. I’ve been wondering….. we are considering returning to the UK for a while to spend time with my ageing Mum. Does anyone know, Is it possible/ethical to claim my lump sum and then monthly payments once there, paid into my existing UK account? thanks again. @Andrew from Vista Financial

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2 minutes ago, Snowbound said:

Thanks for all your replies. I put this to bed for a while as it was hurting my head! 🤣. BUT I do need to get this sorted. I’ve been wondering….. we are considering returning to the UK for a while to spend time with my ageing Mum. Does anyone know, Is it possible/ethical to claim my lump sum and then monthly payments once there, paid into my existing UK account? thanks again. @Andrew from Vista Financial

If you are only intending to return to the UK "for a while" you will most likely not terminate your Australian residency and so will still be taxable in Australia. If however you are going to be spending a few years outside of Australia it might work, but there's a whole host of issues that could either make you still deemed to a resident of Australia or cost you more tax as a non-resident of Australia. You need to look closely at what assets that you'll have in Australia as well as well as what other ties you will have.


Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia) www.kbfayers.com

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