HMRC offers fresh advice on overseas pensions

HMRC offers fresh advice on overseas pensions

People considering moving their UK pension to a QROPS should heed new government guidance and seek independent advice, according to an industry expert.

HM Revenue and Customs (HMRC) has issued advice for those who wish to transfer their UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS).

A QROPS is the general term for any offshore pension scheme recognised by the HMRC that allows non-UK residents to transfer their UK private or corporate pension into it, tax free.

The guidance comes after a judicial review in relation to a Singapore-based scheme called ROSIIP, which forced HMRC to review its QROPS policies.

ROSIIP appeared on the HMRC approved list for around 14 months, but was removed in May 2008 after it discovered problems with it.

That meant 122 UK pension holders who had transferred their pensions to the Singaporean scheme faced a possible 55 per cent tax charge on their savings for making an unauthorised transfer.

Following a judicial review in June 2013, HMRC agreed to withdraw the penalty charge and pay the pensioners’ legal costs.

Mr Justice Charles, who conducted the review, scolded HMRC for its “shameful” behaviour in the case, and ordered it to publish a full statement on its QROPS policy.

HMRC stated in the recently-published guidelines that it would not pursue legal action against pre-September 2008 QROPS transfers again, except “where there is evidence relating to the transfer of dishonesty, abuse, artificiality or any similar circumstances”.
September 2008 was the date that a disclaimer was added to the HMRC website stating that it had not done any due diligence on the listed schemes.

HMRC admitted that the wording on its website prior to the caveat being added, “may have been misleading”.

It went on to advise: “You should get independent professional advice and confirm with the scheme that it meets the requirements to be a QROPS before agreeing to the transfer.”

Justin Harris, the managing director of Chase Belgrave, an independent financial advisory company, believes that “should have been the case from day one”.

He added: “Even with the disclaimer, it’s our opinion that there should be no public list at all. Due diligence should be done by a trained independent adviser on a scheme-by-scheme basis to make sure an overseas pension scheme is a compliant QROPS.”

Mr Harris said that if the scheme is located outside of the EU, or in a location that does not have a double taxation treaty with the UK containing pensions-specific agreements, then “caution should be applied”.

He also advised caution if a pension scheme is structured differently to a UK scheme, such as offering a lump sum greater than 30 per cent of the value.

“QROPS are more often than not the best choice for those with a UK pension who are long term non-UK residents, but as ever, if it seems too good to be true, it very well may be,” he warned.

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