Expats who have wrongly paid the QROPS overseas transfer charge have a new set of rules to follow.
The Pension Schemes (Information Requirements – Repayment of Overseas Transfer Charge) Regulations 2019 came into force last month.
Although the option to reclaim the charge has always been available, the regulations lay out a more formal procedure.
The overseas transfer charge – a 25% tax on the value of a QROPS pension transfer – comes due when a retirement saver switches a UK or existing QROPS to a QROPS that is not based in the country where they live.
New overseas transfer charge rules for expats
The charge was aimed at stopping transfers to ‘third party’ QROPS, when an expat living somewhere without a QROPS provider, such as Dubai, could transfer pension savings to Malta or Gibraltar.
Retirement savers outside Europe have a choice of just 13 offshore financial centres providing QROPS.
HMRC viewed these transfers as suspected tax avoidance.
Un der the new rules, a retirement saver can reclaim the transfer charge if their personal circumstances have changed within five years of the date of the transfer and they are now exempt from the rules.
The main reason for such a claim would be an expat moving to the same country as where their QROPS is based.
Legislation clarifies process for reclaiming tax
“These instruments provide the detail that individuals, pension scheme administrators, pension scheme managers and HMRC need for the process of claiming a repayment of overseas transfer charge in certain specified situations, including who should make that claim and how to make the claim and the repayment,” said a memo published by HMRC with the draft regulations.
“The first instrument also covers the repayment of overseas transfer charge where it was deducted and paid in error.
“This will enable the right people to make the right claim for overseas transfer charge within the time limits. Without this instrument individuals, pension scheme administrators, pension scheme managers and HMRC would not know the process for claiming or making a repayment.”
The overseas transfer charge does not apply in the European Economic Area, where retirement savers can have a QROPS based in any EEA country providing they live within the bloc as well.