Fan Mo
Fernanda Bajanca
Quentin Loisel
Drop in Pound-Euro exchange...
39 Comments
Hi Mayank, the UK has a progressive tax system (above a certain threshold) so that if you earn a lot at the end of the fellowship you might have to pay higher peak tax rate than if you spread it out more equally.
Hi Mayank and Stefan,
as far as I know, income tax is calculated on a yearly basis. Thus, it shouldn't matter in the end if you receive the compensation for underpayment in a lump sum, or spread over several months in form of an increased salary. You may have to request a tax return at the end of the tax year, though. This is really easy in the UK and basically amounts to writing a letter to HM Revenue & Customs explaining why you think you paid too much taxes.
Anyway, I would expect the administration to be rather reluctant to adjust the exchange rate mid-contract. After all, if the exchange rate bounces back and they overpay you, they will have to cover the overpayment from their own resources, as they have no means whatsoever to get the money back from you.
Cheers,
Michael
Hi Michael, thanks for this message. I think some additional factors need to taken into account, as the tax ends in March but grants may end at any other point after that ... So the lump sum doesn't necessarily regard the same tax year. Cheers, Stefan
It really depends on your marginal tax rate, i.e. the amount of tax you pay for one additional GBP earned. If your income exceeds 32k (e.g. for a full-time MC fellow) , this amounts to 40%. The next band starts at 150k - you'll have a hard time hitting that with the lump sum payment at the end of your contract. Assuming your follow-up appointment is also in the UK, and with a salary within the 32k-150k bracket, then the lump sum will be taxed at 40% - the very same rate as if it were added to your current salary on a monthly basis. Hence, no loss, no gain.
If you're leaving the UK after the fellowship, you could actually save taxes if you receive a lump sum at the end, but only if your regular salary in the tax year doesn't hit the 32k threshold. Then you would only pay 20% on the part of the lump sum below 32k (but still 40% on everything above).
However, the lump sum may count into the progression for your new host country, and you'll be taxed at a higher rate for that year in that country. But it really depends on the very specific circumstances if you'll end up paying higher taxes overall.
All in all, unless one is financially desperate, I wouldn't go through the hassle of trying to convince my HR to adjust my salary. It seems to me that only under very specific circumstances would you end up paying more tax when going for the lump sum option.
Hi, all this discussion about taxes has no much sense, as usually (i.e. in 90% of case) Marie-Curie fellows are tax-free people, have NT tax-code, which means, that they are exempted from paying the income tax. See my comment at the bottom
Best, jakub
Thanks, Stefan !
I didn't know that. I will check with the admin to revise the exchange rate in that case.
Regards
Mayank
Hi Stefan,
Thank you for opening this topic which I'm sure many of us are wondering about the same.
Where do you take this information from "Depending on your initial exchange rate, the raise might be up to 20%"? I have started my MC in May 2014, do you think I won't benefiate about this possible raise? Anyway, I thnk (at least in my case), I think a raise of 20% will be very diffult becuase due to the oscillations sometimes you might be being overpaid or underpaid. Of course, there is a huge drop on the value of pound. But, I think it will still be difficult.
Regards,
Pedro
Hi Pedro, thanks for your message. in my case the difference between 0.71GBP/Euro (starting) and 0.85GBP/Euro (current) would be ca. 20%
For me, the starting rate on the contract was 0.769GBP/EURO, so theres a difference of 10%. In the contract it states that the rate is different from the current one to compensate for fluctuation. However, it was adjusted at some point (March 2015) to compensate for overpayment, fixed at 0.685GBP/EURO. That would mean a difference of 22% :(
Hi Miltiadis, well if they adjusted it downwards they should be able to adjust it upwards? :-)
Best, Stefan
They should be. But I havent received any notice on that. Maybe an email is in order to clarify the situation.
Dear All,
This is my first post ever here, as I just began my MC fellowship in London. The exchange rate here is set at 0.65, which seems to be really low compared to yours.
Do you know who is the decide on the rate? Is it up to the HR? I don't seem to find one person who is responsible for taking this decision.
Best,
Agnieszka
Hi,
another question is, how much the total amount of the fellowship - paid in pounds - finally is. I am not sure WHEN the University receive the payments from the EU, and at which conversion rates. Does anyone knows details how this works? I only know that we should receive 'the full amount', whatever it is, in the end.
Cheers,
Andreas
Hi Andreas, as far as I know the Commission sends an "average rate" to your employer at the end of your contract. This rate is the average calculated from all the different rates which occurred during the contract. Based on this "average" rate the final lump sum compensation payment is then calculated.
Can anyone confirm that this is true?
Best,
Stefan
I always thought the employer receives the funds in EURO, otherwise there's no point in changing the exchange rate.
Yes, but the euros are converted into pounds during transaction to the British bank account of the University, I think. So I initially thought it matters when the transactions are made. Or may not if the EU uses an averaged exchange rate, but then I am not sure how they will arrive at exactly the amount (in euro) which was initially set in the grant agreement
The university research office receives the grant money for most Marie Curies in full at the start on the agrement. At that stage the exhange rate is applied, i dont think anyone will get anything extra. Universities usually have insurance against the exhange rate going in the opposite direction, im sure noone would expect a pay cut if it went the opposite way.
Dear colleagues,
I am not sure if you are aware that MC fellows are usually exempted from income tax in UK.
I am Polish and I did this when I was in UK. For example, here is UK - Germany case:
according to
https://www.gov.uk/government/publications/germany-tax-treaties
"2010 Germany - UK Double Taxation Convention - in force"
you can find there on page 20
"Article 19
Visiting professors, teachers and students
1) An individual who visits a Contracting State for a period not exceeding two years for the purpose of teaching or engaging in research at a university, college, school, museum or other cultural or educational institution of that State or under an official programme of cultural exchange and who is, or was immediately before that visit, a resident of the other Contracting State shall be exempt from tax in the first-mentioned State on his remuneration for such activity, provided that such remuneration is derived by him from outside that State.
2) Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State."
all the best, Jakub
The key sentence is here: "provided that such remuneration is derived by him from outside that state."
Since MC fellows typically receive their income from a UK HEI, this exemption does not apply.
sorry but you are not right, I managed (and many of my MC friends) to get NT tax code, i.e. no taxes
Sounds awesome - can you enlighten us how you achieved that? I'm sure I'm not the only one who would like to know...
MC people simply need to send a letter to HM Revenue & Customs, asking for NT tax code, and explaining this bussiness with "avoiding double taxation agreement"
It did work in Yorkshire and Manchester areas.
Hi Jakub,
just to clarify, were you an MC PhD Fellow, or a postdoc (IEF or similar)? I'm asking because HR departments all over the country seem to very clear about the fact that MC postdocs must pay taxes. Things may be different for PhD students, though.
Hi there
I am a MC PhD fellow at Bristol and I have been paying income tax and NI (national Insurance). The HR and Salary Dep. made it very clear from the beginning in the contract of employment. The HR adviser told us (2 MC PhD) 2.5 years ago that we would be eligible to claim the NI contribution back when we leaving the UK. However, last week I double checked with HR, they this time said that we are not eligible to claim NI back (a total sum is about £9500). Does anyone has experience with this? Please share.
QueAnh
I am afraid, but it is not possible to claim NI contribution back.
What is you tax code? I suggest you to speak directly with HM Revenue & Customs about NT tax code and then about full tax refund. My experience is: administration on UK universities (including HR and salary dep.) in general has very very poor knowlenge about taxes for Marie-Curie fellows. But first you need to find maybe some tax agreements between your country of "tax residence" and UK.
> just to clarify, were you an MC PhD Fellow, or a postdoc (IEF or similar)? I'm asking because HR departments all over the country seem to very clear about the fact that MC > postdocs must pay taxes. Things may be different for PhD students, though.
Actually I was able to "annihilate" income taxes twice. When I was PhD MC fellow in Germany (2007/08) at Albert-Ludwigs-Universität Freiburg, I used "Polish-Germany
agreement on double taxation". Afterwards, I did exactly the same in Leeds (Polish-UK agreement), as a MC fellow (IEF). Many of my friends (MC fellows) did this procedure (i.e. sending a letter to appropriate authorities) in e.g. Lyon, Paris, Oxford, Norwich,... My experience is better with Germany. In Freiburg things went very smoothly with the Finanzamt. I was able to get full tax refund very quicly (1-2 months). However in UK I was waiting for 8 months to 1. get NT tax code, 2. get full tax refund.
Of course, afterwards MC people (PhD, IEF fellows) need to sort out tax issues with their home countries, i.e. countries of the "tax residence".
Jakub,
as far as I understand it, the double taxation agreement essentially says that you have to pay taxes only in one of the two countries. That is, if you don't pay taxes in the UK, then you have to pay them in Poland (or Germany, or wherever).
"In this world nothing can be said to be certain, except death and taxes."
Ben Franklin
;)
Michael
Yes of course. But in Poland (and possibly in other coutries) taxed are much less than in UK, and under certain (family) circumstances you need not to pay at all, or very small amount. So, it is always better to ask for such tax exemption in UK.
Just in case, here is a typical description of this principle in de: "Eine naturliche Person, die sich in einern Vertragsstaat zur Ausubung einer Lehr- oder Forschungstatigkeit an einer Universitat, Hochschule oder einer anderen anerkannten Lehreinrichtung in diesern Vertragsstaat aufhalt und irn anderen Vertragsstaat ansassig ist oder unrnittelbar vor diesern Aufenhalt ansassig war, ist irn erstgenannten Vertragsstaat rnit ihren fur diese Lehr- oder Forschungstatigkeit bezogenen Vergutungen fur hochstens zwei Jahre ab dern Tag ihrer ersten Einreise zu diesern Zweck von der Steuer befreit, vorausgesetzt, dass sie rnit diesen Vergutungen irn anderen Vertragsstaat besteuert wird."
Michael,
I can't agree more - death and taxes are certain. It is lawful to pay income tax either here in the UK or in another country (in my case, I rather pay tax here than in Denmark!). If not, there won't be any MC fellowships. After all, as MC fellows we are using (enjoying!) tax payer's money.
The main and original topic of this discussion thread is about Pound-Euro exchange rate, and the inconsitency in the finance management of UK universities.
NI - as I was explained- is for unemployment benefits (for Bristons), which most of MC fellows don't (or don't hope) to receive.
Best, QA
Michael,
I can't agree more - death and taxes are certain. It is lawful to pay income tax either here in the UK or in another country (in my case, I rather pay tax here than in Denmark!). If not, there won't be any MC fellowships. After all, as MC fellows we are using (enjoying!) tax payer's money.
The main and original topic of this discussion thread is about Pound-Euro exchange rate, and the inconsitency in the finance management of UK universities.
NI - as I was explained- is for unemployment benefits (for Britons), which most of MC fellows don't (or don't hope) to receive.
Best, QA
Michael,
I can't agree more - death and taxes are certain. It is lawful to pay income tax either here in the UK or in another country (in my case, I rather pay tax here than in Denmark!). If not, there won't be any MC fellowships. After all, as MC fellows we are using (enjoying!) tax payer's money.
The main and original topic of this discussion thread is about Pound-Euro exchange rate, and the inconsitency in the finance management of UK universities.
NI - as I was explained- is for unemployment benefits (for Britons), which most of MC fellows don't (or don't hope) to receive.
Best, QA
> HR departments all over the country seem to very clear about the fact that MC postdocs must pay taxes..
You might see me as an cruel person, but my advice is: do not speak about you salary (as MC fellow) with people from HR at your University in UK. Speak only with HM Revenue & Customs. This is the only authority who is eligible to get any decisions about taxes. People from HR are usually bored and do not want to have additional problems about your taxes. People from HR at Leeds Universities gave me (and possibly other MC fellows) very stupid advices about taxes, which I completely ignored.
Im pretty sure that could be considered tax evasion on that since my project has 6 MC fellows in the UK, all of them paying taxes and being employees of the according institution.
PS: Some people have debts to repay (such as mortgages etc.) so they may have every reason to want their MC grant to be paid out as quickly and evenly as possibly and not as a lump sum at the end.
In addition there is the question of the USS pension opt-out. If you opt out of this additional pension, some universities hold the entire sum back and pay it as a lump sum at the end.
I chose to opt out of the pension scheme at the beginning of the project. It seems that you can get addtional 500 pounds roughly each month beore tax. But the whole monthly salary hits the threshold for 40 % income tax rate, so the total salary is increased by around 300 pounds.
Besides, the university administration made a mistake at the beginning because they ingored my request for pension scheme opting-out. They did not find the mistake until 6 months later, so I got the whole pension for six months within one month, which resulted in higher tax payment. I am wondering if and how I could get the tax back.
Dear Yajun,
You need to write a letter to HM Revenue & Customs. It is explained here: https://www.gov.uk/claim-tax-refund
Cheers,
Michael
We had a massive incident about these salaries with our HR department. One day, they did the calculations again and then they increased our salaries, without giving us a warning. The problem is they started paying us different amounts (as 14 Marie Curie PhD students, we all are supposed to receive the same amount). They say that they will cover these differences and will do the proper adjustments. I don't know when. On top of this there is this brexit fluctuation now, which will complicate things.
My question is related to that extra amounts we will be payed. Some of us have contracts that are supposed to end on 1st of April, some have their contracts ending later in April. Because first week of April is the end of tax year, should we expect to payed in diferent amounts depending on that timing? I hope I make sense..
Thanks a lot.
Hi Stefan,
I could not understand the last point that you made - " if you wait until the end of your fellowship for a final adjustment and then receive a big lump sum, you will be likely to pay higher taxes".
What will be the difference in the total tax amount : (1) if we get a lump sum amount at the end, (2) if our salaries are increased now and we get a hike in our monthly pay.
Regards
Mayank