Qrops transfers will be hit with a 25 per cent tax charge unless they are made within the European Economic Area or the Qrops is provided by the individual’s employer.
Budget documents published today confirm that transfers to Qrops requested on or after 9 March 2017 will be taxable unless, from the point of transfer, both the individual and the pension savings are in the same country, both are within the EEA or the Qrops is provided by the individual’s employer.
Where this is not the case, there will be a 25 per cent tax charge on the transfer and the tax charge will be deducted before the transfer by the scheme administrator or scheme manager of the pension scheme making the transfer.
The Budget also widens the scope of UK taxing provisions so that, following a transfer to a Qrops on or after 6 April 2017, they apply to payments out of those transferred funds in the five tax years following the transfer.
The Treasury says the measure supports its objective of promoting fairness in the tax system. It continues to allow overseas transfers from pension schemes that have had UK tax relief that are made when people leave the UK and take their pension savings with them to their new country of residence.
Payments out of funds transferred to a Qrops on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual is resident.
Retirement Advantage pensions technical director Andrew Tully says: “This appears to be a significant shutting down of the Qrops market, restricting overseas transfers to situations where people have an overseas employer’s scheme or the Qrops is in the EEA. The Government has been increasingly concerned about the use of these schemes for the past few years and this appears a major move to reduce their use.”