HMRC QROPS update after draft legislation
The UK HMRC announced new rules for QROPS on December 6th, in the form of a consultation period which will end on January 31st.
The proposals include:
- QROPS scheme must be recognised for tax purposes in the country where the QROPS is based
- Same Tax rules as the residents and non residents of the jurisdiction will be applied to the QROPS - this catches most jurisdictions including Isle of Man and Guernsey which subject their residents to Tax
- Client must sign a declaration to confirm that they are aware of any Tax consequences when transferring their pension into a QROPS
- Specific legislation for New Zealand QROPS was proposed in order to prevent taking 100% of pension fund as a lump sum
- New reporting rules - all payments made out of a QROPS must be reported to the UK HMRC for a period of 10 years from the time of transfer into the QROPS, a significant change from the 5 years of non residency
- New reporting rules for the Pension Trustees
deVere experts comment that , "Having spoken to the Guernsey providers, there are already plans in place for the Guernsey Government to meet this week to change their legislation in order to comply with the suggested rules by April 6. It seems to be clear that HMRC is aiming the regulations changes at New Zealand, but also want to ensure that Tax is paid somewhere".
Notably, Malta is still in a very good position with its many double taxation treaties and will thus clearly benefit from these changes, if implemented.
"Our view is that business is as normal, but with a strong emphasis on getting business in now before the 10 year reporting comes in and the lifetime limit is reduced".
If implemented, the changes will come onto legislation on April 6 2012
HMRC proposes legislative changes to QROPS
It has been reported that HMRC has proposed a series of legislative changes to the QROPS regulations, as part of the draft Finance Act 2012 legislation published yesterday.
The proposed changes, which took the industry by surprise, include:
- 5 year non-UK resident rule for scheme reporting - will be changed to 10 years from the date of transfer
- QROPS must be recognised for tax purposes in the new country of establishment
- Individuals will have to acknowledge the tax implications of moving their pension out of the UK, which could be a requirement prior to successful transfer of a scheme
QROPS industry leaders commented that HMRC may be trying to "use a hammer to crack a nut" with the draft legislation and expect the industry to lobby against the proposals.In a statement, HMRC said, "Today the Government is setting out the purpose of the QROPS regime and what it expects from those who use it. The Government's intention is to ensure that the rationale for allowing transfers to QROPS to be made free of UK tax is followed"."The Government is preserving the ability for those intending to leave the UK to take their pension savings with them to continue saving and provide an income when they retire", it added.The technical department of deVere Group will provide further details once more information is gathered. If you wish to learn more about QROPS UK pension transfers, speak to a deVere Financial Adviser today.