Duncan Lewis

HMRC declares Qualified recognised overseas pensions schemes are meant for migrants only

Date: (11 May 2012)    |    

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The HM Revenue & Customs (HMRC) has declared that the pension scheme Qualified Recognised Overseas Pensions Schemes (Qrops) was suitable for migrant workers only.
The global Qrops industry could be turned on its head after HM Revenue & Customs declaration.
In an explanatory note accompanying legislative changes to Qrops, HMRC said the intention of the Qrops system was only to allow migrant workers to transfer their pension overseas and not to give tax advantages.
Currently UK expatriates transfer their pension to a Qrops in a tax advantaged jurisdiction which was not necessarily the country they were living in. Many of these so-called third country jurisdictions offered a low tax rate and have established substantial Qrops industries.
Qrops adviser Steven Ward said the note suggested HMRC wanted to limit the conditions under which a Qrops could be opened and transferred for country to country. It was an attack on expats. Migrant workers went to a particular country their home country and the HMRC wants the person and the pension fund to be in the same place, he said.
Many emigrants were currently using a Qrops based outside the country where they had moved to live in, for example to schemes based in Guernsey or the Isle of Man. Ward said HMRC’s declaration means this would not be allowed in the future, except within the European Union (EU).
HMRC was looking to move the objective of Qrops. The line on migrant workers which is for the first time being seen will see transfers within the EU only. No transfers would be allowed to a third country jurisdiction or to Guernsey or the Isle of Man, which were not EU members, unless you live there.
In its explanatory notes HMRC said the tax regime for pension savings provided transfer of tax free pension savings of an individual leaving the UK to another country. The intention was to allow portability of pension savings for migrant workers.
To guard against such transfers being made for evading, the conditions the recipient overseas scheme must meet are intended, broadly, to ensure that tax advantages are not available which would not be present if the funds remained in the UK.
Qrops providers from Guernsey were rushing to EU member jurisdiction Malta after HMRC removed the approval of 300 schemes. It followed a change in regulations by HMRC that ruled out Guernsey’s tax treatment of non-residents