Changes by HMRC shake up access to overseas pension schemes
HMRC have announced that going forward only “residents-only” pension schemes will make it onto their list of approved Qualifying Recognised Overseas Pension Schemes (QROPS)
Just how this will affect the Channel Island of Guernsey, where pension schemes are the main employer, remains to be seen.
The changes are in conjunction with Clause 2.69 of the Finance Bill 2013 that was published as part of the 2012 budget and stated that “any country or territory that makes legislation or otherwise creates or uses a pension scheme to provide tax advantages that are not intended to be available under the QROPS rules will find the schemes excluded”.
Essentially the new provisions mean that pension schemes will no longer be available if found to be used by non-residents of Guernsey. Historically, people have transferred their pension schemes to the island in order to reap tax benefits. From now on Guernsey pension providers will only be allowed to accept transfers of the UK pensions of residents of the island.
Pension schemes already established should be largely unaffected and the developments will not affect past transfers into schemes which were once QROPS or the UK taxation of assets in such a scheme.
In the statement the HMRC also confirmed that they would be taking a closer look at the island’s 157E scheme, which treats residents and non-residents equally, in an effort to prevent this being recognised as an approved QROPS.
From April 6, in order for a pension scheme to be a QROPS, if there is a tax relief for non-residents on benefits paid from a pension scheme then the same, or substantially the same, tax relief must also be available to residents.
HMRC have updated its list of approved QROPS and it was published on April 12 following a series of technical discussions.
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