£125m QROPS Tax Windfall Plan Flops For HMRC

Plans to raise millions of pounds from retirement savers from the QROPS overseas transfer charge have flopped.

HM Revenue & Customs forecast a £125 million windfall for Treasury coffers from the charge in the in the 2017-18 and 2018-19 tax years.

Instead, the measure raised just £760,000 from only 24 savers last year and £1.4 million from 30 transfers the year before.

In 2018-19, 5,000 retirement savers transferred £640 million into QROPS pensions with each transfer averaging £128,000.

That means just 0.48% of QROPS transfers in the tax year attracted the charge.

What is the overseas transfer charge?

The overseas transfer charge is paid by expats moving money into an offshore QROPS pension when the scheme is based outside the European Economic Area (EEA) in a place other than the country where they live.

Expats in the EEA can have a QROPS offshore pension based in any EEA state.

For example, a British expat in Thailand moving retirement savings to an Australia QROPS would pay the charge, while an expat in Australia placing funds in a local QROPS would not.

The charge is levied as 25% of the value of the funds transferred into a QROPS.

The overseas transfer charge was introduced in March 2017 by then Chancellor Phillip Hammond as a deterrent for expats trying to avoid tax by shifting their pensions savings between countries.

Decline in transfers to QROPS

The figures were published by financial firm Canada Life from a freedom of information request to HMRC.

The firm’s technical director Andrew Tully said: “It looks like the QROPS charge has done the job in limiting the appetite for moving pensions outside the UK to destinations other than the EEA.

“The pension freedoms will also have had an effect in the general decline in the number of transfers to QROPS, simply because of the greater flexibility in how people can access their pensions in the UK.

“The number of pension transfers attracting a charge is a very small proportion of the overall number of transfers to QROPS, and as a result the amount of tax raised is very low.

“However, I’ve no doubt the Treasury will be pleased another tax loophole has effectively been closed and further tax leakage prevented.”

Stay Connected

Latest News

Non Resident Landlord Scheme Explained for Expats

The UK Non-Resident Landlord Scheme (NRLS) is the way HM Revenue & Customs collects tax on rents from property owners who spend...

OECD Explained

The Organisation of Economic Co-Operation and Development (OECD) is a forum for the governments of 37 developed countries to discuss economic and...

QROPS List – June 1, 2020

The number of Qualifying Recognised Overseas Pension Scheme (QROPS) across 28 countries has hit 1,917 – with 13 opening during the past...

FATCA List – June 2020

The US Internal Revenue Service’s list of foreign financial institutions (FFI) reporting under the Foreign Account Tax Compliance Act (FATCA) increased by 1,854...

Economic Impact Payments for US Expats

The US government is paying millions of dollars into the bank accounts of American expats as coronavirus economic impact payments and this guide will...

HMRC Explained

HMRC is short for Her Majesty’s Revenue and Customs. The HMRC collects the taxes and customs duties that the British government spends...

LEAVE A REPLY

Please enter your comment!
Please enter your name here