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Guernsey Qrops facing further HMRC clamp down

Guernsey’s income tax office says HMRC plans to exclude Qrops which provide pensions to residents outside the country from its list of approved providers.

HMRC’s final Qrops rules, published last month, require Qrops providers to treat non-residents and residents of a jurisdiction in the same way for tax purposes from April 6.

Guernsey had hoped it could continue to offer pensions to non-residents after it introduced new 157E legislation designed to meet the Revenue’s new requirements.

However, a note issued by Guernsey’s income tax office says:  “HMRC’s list of approved Qrops, to be published next on April 12, 2012, will only include a Guernsey scheme if HMRC is satisfied that the scheme is ‘residents-only’.

“HMRC indicates that it will seek to revise its regulations further in order to disqualify 157E schemes from Qrops listings.”

It is unclear how HMRC will treat other Qrops jurisdictions.

Guernsey Association of Pension Providers president Stephen Ainsworth says: “We have worked very closely with the Guernsey Income Tax Office and with senior politicians to create a flexible but robust pensions system which not only meets the needs of Guernsey residents but which meets the requirements of HMRC for Qrops transfers.

“Accordingly it is frustrating that HMRC, having set out its detailed rules, then seeks to set them aside without notice in order to meet an unpublished policy objective.

“It is also concerning that, despite advice given by GAPP and others in their response to the consultation on the April regulations, HMRC has not recognised the many reasons why it may be entirely appropriate for Guernsey pension schemes to be open to non Guernsey members.”

Earlier this month, Isle of Man provider Boal & Co de-registered its ’Trinity’ Qrops after the island failed to adapt its pension rules to meet the new HMRC requirements.

A HMRC spokesman says: “From April 6, 2012 one of the conditions a pension scheme must meet to be a Qrops is that if there is a tax relief for non-residents on benefits paid from a pension scheme then the same, or substantially the same, tax relief must be available to residents. This is known as the benefits tax relief test.

“A pension scheme that can have only residents as members will meet the benefits tax relief test. Pension schemes will need to meet the new conditions to be a Qrops.

“If a pension scheme that was a Qrops on April 5, 2012 no longer meets the conditions to be a Qrops, members of the pension scheme will be able to remain as members and receive a pension paid from the sums transferred without incurring member payment charges.”



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There are 22 comments at the moment, we would love to hear your opinion too.

  1. Of all the practices that go on in offshore finance centers, QROPS is probably the least contentious as it does not involve any evasion of UK tax. Guernsey in particular offers genuine pension schemes that are well regulated and follow HMRC’s own rules – hard to see why they are being singled out. HMRC must be putting a whole load of manpower and into this and, by their own admission, they do not expect to make any additional revenue from the process. Surely their efforts would be better spent tackling genuine offshore tax evasion rather than trying to con expat pesnioners out of their life savings?

  2. John Rawicz-Szczerbo 10th April 2012 at 7:05 pm

    If HMRC do intend to revoke the QROPS status of all Guernsey schemes which are open to non-Guernsey resident members, then it seems this is not because they are simply seeking to clamp down on abuse of the QROPS regime (as was the stated intention), but to exclude the use of all third party jurisdictions (i.e. where the member is not resident in the same jurisdiction as the trustees of the scheme).
    If this is the case then all offshore QROPS jurisdictions (and not just Guernsey) may be adversely affected by this proposal.
    What now for QROPS?
    What now for the reputation of the HMRC who ‘mug you’ when leading you down a blind alley?
    What does this say about how our Government behaves?

  3. Scrap all these tax avoidance loopholes.

  4. Spot on to the Anonymous comment above!
    This is ALL about control – HMRC beleive they are a law unto themselves and it is disappointing that they are allowed to do what they do – in fact it is appalling!
    There is nothing for them to gain by these actions so why bother and in this day and age it really is time to stop playing silly beggars of asking for feedback which we all know they will ignore.
    UK HMRC – people leave the UK for multiple reasons but I have yet to find one person emigrating across the world who did it for tax reasons.
    LET GO – it will be OK really!

  5. nice quote with 1 minor correction – Guernsey has NO Pension regulator!!

  6. Interesting that Guernsey has been singled out – maybe this is because it is a ‘3rd country’ QROPS regime that does not offer scheme members the same level of pensions regulation as the UK, ie. none at all and a voluntary code of practice is seen by HMRC as just too weak for this market?

  7. QROPS are indeed used to avoid, or evade, UK tax.

    Transferees tend to be higher rate taxpayers who took advantage of the generous treatment of UK pensions and now seek to avoid, or evade, paying tax on the proceeds. The judiciary included.

  8. I am not a pensions expert, but it would appear that a number of these schemes were designed for and marketed to UK taxpayers, who were never intending to leave the UK for an indefinite period.

    If so, then HMRC are acting appropriately, and the suitability of the original advice is in question.

    If not, then why are HMRC bothering? Could someone please explain.

  9. It does look like HMRC have for some reason got a bee in their bonnet about Guernsey based schemes, which in itself is odd as Guernsey has bent over backwards to meet HMRC guidelines. All that will happen here is that the third party jurisdiction of choice will become Malta. They offer a similar regeme to Guernsey/IOM, with 2 important differences. Firstly they have a pensions regulator and secondly, they are an EU member and this means that HMRC can’t be too draconian with them. I do feel a bit sorry for all of the well run schemes in guernsey who set up a business to run in line with HMRC published rules and have now had the carpet pulled out from under them.

  10. When HMRC announced it was tightening up the QROPS rules it said they were intended to give people who had moved overseas on a permanent basis the flexibility to transfer their pension to the country they were moving to.

    If this is a clampdown on any particular jurisdiction, and I don’t think it is, then there is only one reason for that clampdown.

    That is because the jurisdiction was one of the main locations where funds were being transferred for reasons other than those for which the QROPS legislation was designed.

  11. HMRC have undoubtedly clamped down on Guernsey because of those pension providers who have mis-used the s157A legislation. It states that only Guernsey residents may join this type of scheme and yet they allowed UK residents to join. These pension providers are the cause of the problem and HMRC have reacted predictably. Their actions have affected others who operated within HMRC regulations.
    No doubt HMRC were not impressed with GAPP’s attempt to get around HMRC’s regulations by coming up with the s157E scenario.
    It was the EU Directive that gave freedom of membership to residents of any member state, and HMRC applied that criterion globally for schemes which met the QROPS rules.
    As Guernsey is not in the EU, GAPP has no foundation for any complaint.

  12. Not sure where you are getting your information from Emma but I’m afraid you are wrong. All QROPS (Guernsey or elsewhere) MUST be open to residents and non residents in the jurisdiction where the scheme is established (UK rules). 157A legislation allows both Guernsey and non Guernsey residents to join the scheme.

    Our QROPS are open to people who have left the UK and UK residents who can demonstrate a genuine intention to permanently leave the UK in the near future. They are not marketed at UK residents.

    The switch from 157A to 157E legislation was an attempt by Guernsey to ensure it met the new regulatory requirements which HMRC announced in December – not an attempt to subvert the rules. All 157E did was remove a Guernsey withholding tax requirement for Guernsey resident members – non Guernsey residents still pay income tax on receipt of their benefits in their country of residence. Despite some of the previous posts these schemes are not and never have been about tax avoidance.

    As for the EU directive, as I understand it, this allows EU citizens to migrate their pensions any where in the world, not just within Europe. Many countries simply do not have a pensions regime that can meet the UK QROPS requirements and it therefore makes sense to transfer your UK pensions to a stable and well regulated jurisdiction like Guernsey. Guernsey has always been 100% compliant with UK pension transfer rules and still is – which makes HMRC latest announcement all the more frustrating.

    No disrespect Emma, but it is this sort of misunderstanding and misinformation that lies behind the problems with HMRC and not the actual administration of these schemes which, in Guernsey at least has always been entirely by the book.

  13. Just to clarify the point raised by previous contributors about Guernsey schemes being unregulated.

    It is true that there is no pensions regulator in Guernsey (equivalent to that in the UK), however the trusteeship and administration of QROPS is extensively regulated by the following:

    1) Guernsey QROPS are trust based schemes and fall under the Guernsey trust law.

    2) Guernsey Trustees of QROPS schemes are licensed and REGULATED by the Guernsey Financial Services Commission.

    3) QROPS are of course subject to UK pension transfer legisaltion and QROPS regualtions which Guernsey has always followed fastidiously.

    4) Guernsey QROPS are also approved Guernsey pension schemes and are subject to Guernsey Income Tax legislation.

    5) The Guernsey tax authorities also issue extensive Practice Notes on how pension schemes must be adminstered and which providers must follow.

    6) In addition to the above Guernsey is the only jurisidction to introduce a voluntary code of conduct which almost all the Island’s QROPS providers have subscribed to.

    I do have some knowledge of QROPS in other jurisidictions and there is no doubt in my mind that the above regime makes Guernsey by far the best regulated jurisdiction in the world. If HMRC are no satisfied with this then look out offshore providers everywhere !

  14. David Trenner - Intelligent QROPS 12th April 2012 at 3:12 pm

    What a shame that the two previous comments are anonymous. I suspect that one of them is from Roger Berry who knows more about QROPs than most of us put together!

    John Greenwood wrote a piece recently about the difficulties of HMRC blocking QROPSs and it looks like HMRC have seen that as a challenge! Fundamentally what they seem to be saying is that they can do anything they like, often with retrospective effect, and we can do nothing about it!

    If someone chooses to leave the UK commonsense says that they should be able to take their pension with them, even if they spend part of each year in different countries. And just because you choose to live in a particular country why should you transfer your pension there, rather than to a country with better regulation and security?

    This smacks of the same thinking (or lack of it) which we had with ASP: “that was only meant to be for Plymouth Brethren!!” – of course it was!

  15. The Aussie Experience 12th April 2012 at 4:07 pm

    Australia used to have a process when superannuation (ie pension savings) could be transferred to an overseas registered scheme on completion of a statutory declaration that you were moving overseas permanently. Like the UK, contributions are tax advantaged.

    Upon recognising that the system was being abused the solution was easy. Disallow transfers to overseas funds. No exceptions.

    This means the benefits have to be paid out as a taxable benefit using Australian tax rules.

    A simlar process here could work. If you wantto transfer overseas the payment could be made subject to deduction of tax in the UK.

    Too simple?

  16. With respect to Anonymous (3.24 p.m.), it is you who is incorrect. To join a s157A, s157A(2)(a) requires the individual to be ‘resident’ in Guernsey, as confirmed by the GTO. Perhaps you would be kind enough to identify the amended legislation which supports your statement, ‘
    If the scheme is limited to Guernsey residents only, how can it be open to non-residents? If UK residents are, according to the s157A rules, not allowed to be members, where is the authority to transfer their UK registered pensions?
    Again, you are mistaken, nothing in the FA2004 requires a UK resident to have left the UK or intending to leave the UK to be a member of a QROPS. This has been confirmed by HMRC. Should you have reviewed the CA 1880 and 1881 forms, HMRC changed the non-UK residency requirement in the forms in June 2006.
    The EU Directive was brought in to address the problem of restrictions associated with the movement of EU citizens between Member States. As I stated, HMRC decided to apply SI 206 of 2006 globally.
    If, as you say, everything was 100% compliant why has Guernsey been hit so hard with a complete loss of QROPS status, bar three pension schemes?
    No disrespect Anonymous, but to deny that some Guernsey QROPS schemes abused the QROPS regulations by collapsing pension schemes is acting in denial.
    As I said, it has been the few Guernsey CSPs that abused the QROPS rules that has caused the HMRC backlash.

  17. Can anyone please help a non-expert i.e me understand the current situation? I have a Guernsey RAT (157A) based QROPS provided by one of the major QROPS providers in Gsy, transferred from a UK Company pension scheme about 2 years ago (although been living and resident in Guernsey for for ~8 years). My Wife is a Guern hence us coming across to live. Should I be worried?

  18. I have a UK passport,was born in England, but left to work in Guernsey in 1980 at the age of 22. I have not been resident inthe UK since then. I now live and work in Europe. I paid money into a pension scheme in Guernsey for 15 years and have converted it to QROPS, why should I be happy that HMRC wants to tax me? I haven’t ahd one beenfit from the general UK tax take in the past 32 years. I am sure I am nota lone in this regard.

  19. I have a now delisted QROPS on Guernsey, and I’m a Czech resident. HMRC, or rather the British Goverment are behaving in their usual controlling way. If I live abroad, pay tax in that country, what the hell does it have to do with HMRC?
    If my pension is now delisted, it looks to me like the pension provider doesn’t report in to HMRC either.

  20. I appreciate the information provided by you. This is interested to know about HMRC.
    Keep up the good work. Keep on inspiring the people.

  21. Manish Chaurasiya 27th February 2013 at 11:11 am

    Very good post, I was really searching for this topic as I wanted this topic to understand completely and it is also very rare in internet that is why it was very difficult to understand.
    qrops list

    I appreciate you. This is interested to know about
    If you want to know more about qrops list , go to the link above and I am inform all my users and we have provide this facilities.

  22. Manish Chaurasiya 1st March 2013 at 7:23 am

    There is NO requirement to purchase an insurance annuity.
    Leave all unused pension funds to your beneficiaries free of UK taxes.
    There are no limits on contributions to the fund, nor fund size.
    Flexibility as to when benefits can be taken from the Plan (personal tax status allowing).
    Take income and benefits in currency of your choice.I appreciate you. This is interesting information provided in this post.
    If you want to know more about QROPS , go to the link below.

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