HM Revenue and Customs (HMRC) has stated it will no longer chase unauthorised payment tax charges regarding Qualifying Registered Overseas Pension Scheme (QROPS) transfers made before the 24th of September 2008.
The turnaround follows a recent defeat in court, in the case of R (Gibson) vs the Commissioner for HMRC.
A scheme is added to HMRC’s QROPS list after the scheme manager has lodged a submission.
However, each scheme’s compliance is only retrospectively checked by HMRC.
This means if the scheme is found to be at fault at a later date, or if the scheme is removed from HMRC’s list at any point, any transfers may be liable to unathorised tax charges of 55% of the fund.
Since September 2008, there has been a caveat regarding this point – stating that HMRC list is neither exhaustive, nor counts as an approval for a listed scheme from HMRC.
As there was no such disclaimer before this date, HMRC have now admitted that people may have been under the impression that HMRC was satisfied with any and all schemes which were included on the list.
Therefore, in a guidance note published on the 27th of November, HMRC has said it will not “raise or pursue any assessments resulting from a transfer from a registered pension scheme to a scheme purporting to be a QROPS” made before 24 September 2008.
QROPS were launched to allow individuals who are leaving the UK permanently to continue to save and provide them with a larger pension for when they retire.
With this in mind, it is helpful to know that if HMRC can deduce you were not acting within the ‘spirit’ of QROPS legislation at the time of your transfer, this can work against you at court at a later stage.
This would include using QROPS to withdraw savings as the large lump sum, or purely to avoid the higher rates of tax in the UK.
As to be expected, this also includes fraudulent activity or “the falsification of documents or information.”
If you transferred before Sept 2008
As stated by a spokesperson for the HRMC, anyone who has paid tax on a QROPS transfer before the 28th of September 2008 which appeared on the QROPS list at that point in time should contact HMRC for further information on their scheme.
If you are considering a transfer
If you have not yet made a transfer, HMRC has states that an individual “should get independent professional advice” and additionally confirm with the scheme that it meets every necessary QROPS requirement “before agreeing to the transfer.”
An independent financial advisor can not only guarantee that your scheme is operating within the spirit of HMRC.
They can also outline which jurisdiction is the best option for you and highlight all the aspects you should be aware of before a transfer.
To be put in touch with such an advisor, please use our contact form.