Qualifying Recognised Overseas Pension Schemes (QROPS) will have their QROPS status removed in two ways, according to new proposals published by HM Revenue and Customs.
The scheme administrator can tell HMRC that the pension wants to change status or HMRC can exclude the scheme.
Both methods result in the scheme’s removal from the QROPS list, which means UK registered pension schemes cannot transfer pension funds to them.
If funds are sent to an excluded QROPS, they become unauthorised pension withdrawals and subject to tax – depending on whether the pension member has been UK tax resident in the five years prior to the transfer.
Current regulations only let HMRC exclude a QROPS if the scheme manager demonstrates a ‘significant failure’ in providing pension scheme information required by law.
Delisting a QROPS
If the new proposals are adopted, several events will lead to a QROPS exclusion by HMRC:
- The scheme has no manager
- The scheme has had a ‘significant’ failure in complying with QROPS rules
- The scheme has failed to supply accurate information required by HMRC
- Any declaration about supplying information to HMRC is false
“A scheme can be excluded if certain things happen and as a result HMRC consider that it’s not appropriate for the scheme to continue to be able to receive tax favoured recognised transfers from registered pension schemes,” HMRC guidance notes for the new QROPS rules says.
If a QROPS is excluded, HMRC will tell the scheme manager by letter.
The manager can appeal the decision with 30 days of notification.
HMRC reserves the right to reinstate QROPS status and will tell the scheme manager in writing if they do so.
Chris Wright of QROPS specialist QropsInvestor.com explains, “A ‘significant failure’ is failing to give HMRC required information or evidence or when HMRC has reasonable suspicion that failing to give information or evidence is hampering efforts to collect any tax due.”
The HMRC guidance explains that each case will be considered on its own merits and specific failures cannot be outlined in advance.
However, the information HMRC typically seeks from a QROPS manager covers payments made to scheme members, failing to notify changes to the scheme, failing to notify the schemes QROPS status and failing to respond to requests for a fund transfer.
The proposals are part of HMRC’s tightening of tax rules for QROPS retirement savers and take effect from the date of royal assent to the Finance Act 2013.
If you are interested in transferring your UK pension to a QROPS and would like to be put in touch with a qualified financial adviser, please contact us via the contact form here for a referral.