Shrinking QROPS landscape causes concern for expats By Billy Popham
F
our years ago, when I penned an article on Qualifying Recognised Overseas Pension Schemes (QROPS), I warned that Chancellor of the Exchequer Alistair Darling would not be happy with the income tax revenue that he was losing via the transfer of pensions away from Her Majesty’s Revenue and Customs (HMRC) jurisdiction and that if the mis-selling continued it could give the government an excuse to close a potentially lucrative vehicle for expatriates. The mis-selling of QROPS carried on unabated, mainly via New Zealand, where the schemes allowed people to take 100 percent of the value of their pensions out from day one. As the principle behind QROPS is that the Trustees enter into a spirit of cooperation with HMRC to provide an income for life for the pensioner it was clear that HMRC was very unhappy with this state of affairs. New draft legislation was announced in December 2011 that outlawed this practice from April 2012, leaving anyone who had taken this option looking over their shoulder in fear of a large tax bill from HMRC. As well as stopping so called ‘pension busting’, the encashment of 100 percent of the funds, the stricter legislation also effectively closed many third party jurisdictions to new business. The most high profile casualty of this new legislation is Guernsey, despite the attempt by authorities on the island to realign its pension leg-
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The Brief
Issue 3/2012
Bernard Jackson, from the International Consortium of British Pensioners, delivered a strong protest to 10 Downing Street about frozen pensions.
islation to fit within HMRC’s new rules. HMRC quoted a vague but all encompassing statement within the new legislation to shut the door on over 300 Guernsey QROP schemes. Guernsey is considering its options in fighting back but history has taught us that battles against HMRC are rarely won.
Guernsey of their new 157E pensions to fit within the new rules actually contravened this legislation.
The legislation stated that pension schemes ‘in countries or territories will be excluded from being a QROPS’ where this jurisdiction ‘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’. HMRC has deemed that the formation by the States of
Third Party Jurisdiction refers to Guernsey, Malta or New Zealand as the third party where the first party is the UK and the second party is your selected retirement jurisdiction such as Thailand.
This led to the States of Guernsey Treasury Minister Charles Parkinson stating, “It is now clear that the UK wants to scrap the idea of third party jurisdiction QROPS.
With current Chancellor George Osborne increasing the pressure on HMRC’s Chief Executive Lin Homer