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.