HMRC has rushed to amend the text on its controversial QROPS list, to try and bring attention to the fact that simply making an appearance on the list means very little in terms of meeting the necessary criteria to ‘qualify’ and be ‘recognised’.
The QROPS list is published every fortnight, and features all new additions and removals in the QROPS market. But British expats who consult the list before transferring their pensions from the chaotic UK market need to be aware that although HMRC are happy to publish the list, they haven’t actually looked into each scheme they include. Some may argue this kind of makes the list redundant, but HMRC have cleverly dropped the ‘Q’ from their descriptive text, meaning they count all inclusions as ‘Recognised Overseas Pension Schemes’, not QROPS.
HMRC Warning
The new text reads as follows:
“[HMRC] can’t guarantee these are ROPS or that any transfers to them will be free of UK tax. It is your responsibility to find out if you have to pay tax on any transfer of pension savings.
“HMRC will usually pursue any UK tax charges (and interest for late payment) arising from transfers to overseas entities that do not meet the ROPS requirements even when they appear on this list. This includes where taxpayers are overseas. HMRC will also charge penalties in appropriate cases.
“Tax relief is given on pensions to encourage saving to provide benefits in later life. Accessing benefits (directly or indirectly) before age 55 will result in a liability to UK tax charges in all but the most exceptional circumstances.
“You should seek suitable professional advice including from a regulated financial adviser.”
It would appear this new warning applies to groups attempting to start up pension liberation-style schemes who look to grant early, 100% access to UK pension holders moving overseas.
Precedence for Loss
The QROPS list has been brought into question on many an occasion, not least when HMRC decided to remove a fund based in Singapore in 2008 and subsequently try to get their hands on 55% of the savings of hundreds of expats affected by the scheme removal.
If a scheme fails to qualify, any transfer is seen as being an illegitimate one and is subject to the 55% penalty fee. But HMRC published a list featuring the Singapore fund in 2006, and then subsequently brought in the warnings regarding the 55% penalty fee in 2007.
The case was brought to the High Court in London, which found in favour of the pension holders, an embarrassing outcome for HMRC.
No Freedom
QROPS have been hitting the headlines recently as the Government performed an astonishing U-turn on the proposed extension of the newly introduced pension flexibility in the UK, to the overseas market.
QROPS were always supposed to retain 70% of the fund as an income for retirement, but the Government were all set to remove the rule. QROPS must essentially mirror pensions found in the UK, but having properly assessed the situation, the Government were notified that expats could in many circumstances take there entire pension to out of the UK and withdraw it n one g more or less completely free of tax, something they weren’t to keen on.
All EU members are still able to offer 100% access, though no regime offers this completely tax-free. Malta are currently the only jurisdiction to have amended their legislation to cater for those keen on 100% access, although the take up thus far in the UK and in Malta for QROPS has been surprisingly slow.
