Another overhaul is on the way for Qualifying Recognised Overseas Pension Schemes (QROPS) as the government publishes new draft regulations.
Listing both as ‘technical consultations’, the main document proposes changes in the way British expats with QROPS offshore pensions can reclaim the overseas transfer charge if the tax was paid in error or their personal circumstances show the charge should not have been levied.
The second consultation proposes a set of rules to align information requirements under both SI2006/208 and the Repayment of Overseas Transfer Charge regulations.
The overseas transfer charge is widely accepted as decimating the QROPS market.
Introduced in March 2017, the transfer charge applies mainly to expat retirement savers with QROPS pensions who live outside Europe.
Clarification for retirement savers
The rules dictated that QROPS members must live in the same financial jurisdiction as their QROPS was based or pay a penalty of 25% of the value of the transferred fund to HMRC.
In the European Economic Area, QROPS savers can live in any member state if their pension in based in the EEA.
Some exemptions apply to the transfer rule.
The new regulations are aimed at clarifying how expat retirement savers can reclaim the overseas transfer charge.
“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,” the draft papers say.
Expat problems tackled
“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.”
HMRC has systems in place to handle claims for repaying the overseas transfer charge, but the details are guidance rather than regulations.
The current rules impact expats leaving the UK who do not yet live in the country where their QROPS is opened. The new regulations will cover problems like delayed claims or if someone’s move overseas is cancelled.