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Manx provider wants HMRC Qrops ruling

An Isle of Man pension provider is writing to HM Revenue & Customs for clarification over whether changes to the island’s tax rules allow Qrops members to take tax-free cash based on initial transfer value of the fund.

Last month, the Isle of Man government created a new pension arrangement aimed at meeting HMRC’s Qrops regulations.

It allows 30 per cent of a member’s fund to be taken as tax-free cash, with 70 per cent providing an income.

Fedelta Pensions is writing to HMRC following a disagreement between providers on the island over whether or not HMRC will apply the 70/30 split to the initial transfer value of the fund or the value of the fund at the point income is taken, including returns from investments post transfer.

Managing director Nigel Callin says: “The question is whether or not at the point of transfer there is a crystallisation in terms of the size of the fund that has to then be taken to provide a lump sum or whether it includes the growth of those funds transferred in when the benefits are ultimately taken.”

Provider Boal & Co believes the split applies to the pot’s transfer-in value and does not include post-transfer growth but Fedetta argues that it applies to the whole pot, including post-transfer growth.

Isle of Man Treasury deputy assessor of income tax Paul Martin says: “It is all well and good meeting the rules on the island but if you are looking to provide a scheme that, in essence, is going to be a transfer scheme for Qrops, you have got to make sure you meet all the Inland Revenue and HMRC rules.”

HMRC says it does not comment on individual enquiries.

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Why can’t the Isle of Man providers simply read the legislation.

    All HMRC will do is tell them what it says.

    The 70% rule – what it means and where it applies is to be found in SI 2006/ 2006.

    The definition of the UK tax relieved fund (to which the 70% rule applies) is to be found in SI 2006 / 207.

    But to make life easier for you Isle of Man providers – SI 2006 / 206 says :

    ” at least 70% of the sums transferred will be designated by the scheme manager for the purpose of providing the member with an income for life”

    and HMRC guidance at http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM13102150.htm says :

    “Investment build-up within the relevant non-UK scheme on such contributions and provision is not taken into account for the purposes of the member payment charges because it will not have benefited from UK tax relief.”

    Is that really so difficult?

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