The Treasury has closed a Qrops loophole that allowed individuals to use schemes registered in Hong Kong to avoid paying tax while remaining in the UK.
Exchequer secretary to the Treasury David Gauke revealed the measures last week which will be included in the Finance Bill but took effect immediately.
It relates to a new double-taxation agreement with Hong Kong which came into force last week and would have allowed UK residents with a Hong Kong-registered Qrops to receive income at the 15 per cent top rate of tax plus tax-free lump sum payments.
Gauke says: “The Government has set out a clear strategy on preventing tax avoidance. We will not hesitate to take action to stop those who seek to take unfair advantage of unintended tax loopholes. This measure demonstrates our commitment to act quickly to close these.”
An HM Revenue & Customs spokesman says: “We have become aware that it has been suggested to some individuals that they could take advantage of this loophole.”
HMRC says the new clause will allow UK income tax to be levied on payments from a Qrops where the payment arises in the other territory, it is received by an individual resident of the UK, the pension savings in respect of which the pension or other similar remuneration is paid have been transferred to a pension scheme in the other territory and the main purpose was to take advantage of the double-taxation arrangement.
Montfort International managing director Geraint Davies says: “Some South-east Asian Qrops promoters will have egg on their faces, as might some UK firms. Opportunist companies probably thought the tax loopholes would go unnoticed but they were wrong.”
AJ Bell marketing manager Billy Mac- Kay says: “This change will have little impact on transfers to Qrops for individuals retiring overseas.
“The issue which clearly concerns the Government is the promotion of Qrops as a tax-avoidance vehicle to ind- ividuals who have little or no intention of leaving the UK.”