New Qrops rules have confirmed schemes must provide the same tax benefits to residents as non-residents and that all Qrops will be opened up to scrutiny by HMRC.
Final rules published by HMRC today include requirements for Qrops providersto treat non-residents and residents of a jurisdiction in the same way for tax purposes.
The rules, which come into force on April 6 also impose a requirement on Qrops to report all benefits paid out for 10 years from when a member joins a scheme, unless the member is resident in the UK for all or some of the year in which the payment is made. They also require schemes to report any member benefit payments to HMRC in writing within 90 days rather than annual electronic reporting.
Monfort International managing director Geraint Davies says: “This effectively opens up every Qrops ever to scrutiny by HMRC. With some procedures being marketed around the world, intentionally or otherwise to bypass UK limits, the resounding message being delivered by HMRC is do it our way or do not do it at all.”
The rules continue to allow tax free lump sums as long as schemes ring-fence 70 per cent of the value of funds transferred into them for retirement income.
Monfort International managing director Geraint Davies says: “After being resident outside of the UK for 5 years, 30 per cent may be withdrawn as a lump sum. Whether it is taxed or not depends on country of residence. A lump sum drawn from a Qrops as a UK resident could be considered as income and be taxable in UK.”
The Isle of Man’s Association of Pension Scheme Providers has been looking at changes to the island’s 50c schemes which are used as Qrops because they fall foul of of the new rules by paying benefits out to non-resident tax free while residents are taxed. IoM provider Boal & Co managing director Gary Boal suggests one way around this would be exempting residents from any tax on benefits, but the APSP is considering a number of options.
It will also mean rule changes in Guernsey which has firmly resisted the imposition of the requirement to apply to the same tax rules residents and non-residents.
HMRC accidentally published guidance to the rules on its website earlier this month.