Caution needed with Qnups
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Guernsey Qrops provider Concept Group is urging advisers to approach qualifying non-UK pension schemes with caution until HM Revenue & Customs provides more clarity.
Qnups were introduced with new regulations that came into force on February 15 to retrospectively restore inheritance tax protection for UK pension funds that transfer to a qualified recognised overseas pension scheme.
Concept managing director Roger Berry says: “We think the Revenue intends to extend IHT benefits that exist for UK-registered schemes to proper overseas schemes but not to create a new pathway for individuals to just dump a whole load of cash, investments and assets from their estate into a Qnup to shelter them from IHT. The rules may ultimately show that is possible but I do not think that is the intention. If you create or use a structure purely to avoid tax, given recent case law, alarm bells should be ringing as a note of caution.”
Montfort International managing director Geraint Davies says: “What worries me about Qnups is they are targeting new money, not retained money. There never seems to be any suggestion that tax advice should be taken and the advisers all seem to be without UK regulation in place.”
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Readers' comments (1)
Stephen Ward | 2 Apr 2010 9:19 pm
It needs to be remembered that a QROPS is by definition a QNUPS, but a QNUPS need not be a QROPS. Thus IHT protection is extended to a QROPS.
A transfer from a QROPS to a QNUPS (which is not a QROPS) where the QROPS is represented by a transfer from a UK scheme opens up full investment flexibilty including the ability to invest in residential property.
So long as the QROPS transfered out of is not investment regulated as otherwise a 55% tax charge would apply.
With regard to UK residents the coming limitation on high earners to tax relief at basic rate only on registered pension scheme contributions, makes QNUPS an alternative and attractive option.
No effective compulsion to buy an annuity, IHT protection, investment freedom and access to capital are compelling and attractive benefits where the "price" is that of a sacrifice of tax relief on the input.
The regulations that introduce QNUPS (SI 2010 / 0051) are crystal clear, the clarion cry of those who have not read and understood the legislation is always of one of "awaiting clarirty from HMRC".
The SI was subject to an 18 month gap between its publication in draft and it being laid before parliament - plenty of time to ensure "clarity".
Competent advisers whether in the UK or overseas will ensure that clients have the opportunity to seek tax advice.
As it happens neither a QROPS nor a QROPS are of themselves FSA regulated products.
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