The Inland Revenue will be unable to close down a scheme that unlocks pensions by transferring funds to Ireland for at least a year because it would require primary legislation.
The scheme relies on Revenue form PS122, which def-ines a tax treaty between the UK and the Republic of Ireland. Similar tax treaties exist bet-ween the UK and the Isle of Man, Jersey and Guernsey.
Staffordshire firm Smith Cooper Financial Services says the plan has a shelf life of between 12 and 24 months if the Revenue decides to close it down because it would require Parliamentary time to pass legislation.
The plan transfers UK pension funds to an Irish occupational scheme, where funds can be accessed without buying an annuity. It is being offered through UK IFAs as well as Dublin firms.
One firm has agreed specific approval for running the scheme from its professional indemnity insurer.
Some advisers say individuals taking advantage of the scheme must sever all ties with the UK first but firms offering the plan have legal advice that says only employment in Ireland and membership of an Irish occupational scheme are required.
An Inland Revenue spokeswoman says: “The reciprocal agreement between the UK and Republic of Ireland allows transfers where, on a change of employment, an individual moves from the UK to Ireland. If the terms of the transfer do not meet these conditions, then the amount transferred may be subject to taxation.”
Smith Cooper Financial Services director Stephen Jones says: “Now that this scheme is receiving media coverage, it has probably moved to the top of the Revenue's things to do list. But it will take one to two years for them to sort it out because they will need to go to Parliament.”