New rules are coming to tighten up the reporting requirements for Qualifying Recognised Overseas Pension Schemes administrators to provide faster and more detailed information about pension changes to HM Revenue and Customs.
The government has published new legislation detailing the changes, which start from October 14, 2013.
The amendments cover QROPS from April 6, 2012.
What the QROPS rules say
The new rules introduce six major changes:
- QROPS managers must report details of their pensions to HMRC while the funds still hold pension relieved contributions transferred from the UK, even when the scheme ceases to be a QROPS.
- QROPS that fail to meet reporting deadlines will face a new penalty regime
- Retirement savers must tell QROPS managers when they left the UK, even if they are non-resident and the manager must tell HMRC the details
- QROPS managers have to report in to HMRC every five years to confirm whether the pension is still a QROPS from April1, 2015.
- HMRC is demanding more information about retirement savers and their funds from QROPS managers, even if the scheme has ceased to operate as a QROPS.
- Benefits relief is eased for public service and international organisation QROPS – international organisations are agencies like the Red Cross or United Nations, not a multinational company.
Another major topic covered by the new regulations is the introduction of electronic reporting direct to HMRC later in the year.
Until the online portal for QROPS managers opens, a range of updated QROPS forms covering the extra information required in the regulations.
The forms are available for download from the HMRC web site.
Full details of the new The Registered Pension Schemes and Overseas Pension
Schemes (Miscellaneous Amendments) Regulations 2013 t5hat introduce the changes are also available for download.
Who is affected by the QROPS changes?
HMRC expects the changes to impact anyone switching from a UK pension to an offshore QROPS, which is estimated to be around 10,000 retirement savers a year.
The main reason behind the regulations is to allow HMRC to track what happens to pension-relieved contributions that are transferred into a QROPS which then ceases to be a QROPS.
Currently, HMRC has no powers to investigate these schemes, so the regulations provide an important new tax anti-avoidance tool for tax investigators.
The assumption is UK retirement savers are transferring funds into QROPS which then switch to standard pensions in the financial centre where they are based, allowing the members to draw down funds without paying the 55% unauthorised withdrawal charge levied by HMRC.
