Ever decreasing Qrops circles

Would any adviser worth his or her salt rely on an HMRC initiative for planning client needs without at least some warnings to clients that things could change?

Some might suggest that finan-cial planning of any sort should include U-turn warnings as a matter of course. If a significant aspect of planning turns on a recent Government initiative, then that warning should probably be in big bold letters.

We have seen as much with Asps and residential property in Sipps but we have also seen how the taxation of bonds can be massively affected by a change aimed at an entirely different target, in this case, private equity.

The warning signs are there. Qrops’ status has been removed from Singapore and there is speculation about other jurisdictions.

For the moment, the status of Singapore-based investors who have used Qrops’ schemes to date is still up in the air – the Revenue despite urging from Qrops’ providers has yet to confirm their tax status. There is still a threat of a retrospective tax charge of 55 per cent. This is clearly a situation that no one would want to leave their clients in.

There are also a few things which may aggravate the situation – the first is that Qrops are proving popular, which often gives HMRC the jitters.

The second is there is a whiff of sharp practice from some parts of the market. Abbey Expatriate Services warns that many overseas websites targeting potential Qrops’ investors leave a great deal to be desired.

Related to this is a sense that HMRC does not have the time or the resource to properly police what is, in effect, a bit of global system despite the fact the original schemes are UK- based. For all these reasons, the likelihood that a blunt but arguably effective mechanism – effective in HMRC’s eyes at least – may be brought into to play again and several more Qrops-approved countries may lose their status.

The one thing possibly stopping a complete U-turn is that something would probably need to be put in its place.

There is client need in this area but any Qrops’ recommendation should be considered carefully and advisers must warn those using the vehicle that the situation is far from stable.