Prestige Wealth Solutions — QROPS to Face Twenty Five Percent Tax Charge
Anyone who is thinking of moving their pension abroad and making use of the QROPS scheme should not do so without professional advice and assistance as HM Revenue and Customs announce that QROPS schemes for individuals who are not in the European Area will face a twenty five percent tax charge moving forward.
QROPS, qualifying recognised overseas pensions schemes have been used for years and is a chance for individuals to increase their pensions and move them out of the UK. This is mostly seen with those who have gone to live in another country and take their pensions with them, rather than leaving them here in the United Kingdom.
The government believes that by introducing this tax it will provide the Treasury with £60 million per year by 2021 / 2022. Documents that were released with the budget, HMRC (HM Revenue and Customers) advised that the tax treatment for QROP transfers are more or less the same as they were in 2006 and not much has changed since that year.
The belief is that changing this tax is creating a fairness in the tax system due to the fact that these QROPS transfers enjoy tax relief within the United Kingdom. Therefore any transfers requested on or after the 9 March 2017 will be subjected to a twenty five percent tax charge, unless certain criteria is met. The tax charge is put in place before the transfer is made.
The conditions of the 25% tax charge are in place if the QROPS and the individual are in the same country once the transfer is completed or if the QROPS is in a EEA country or in the event of an occupational pension, which has been sponsored by an individuals employer.
Any QROPS payments which were transferred on or after the 6 April 2017 will be subjected to UK tax rules for five tax years, which is effective after the date of transfer and this is in place wherever the individual decides to relocate to.
It is believed that this new policy will provide the government with approximately sixty five million by 2017 / 2018, sixty million by 2018 / 2019 and a further sixty five million for 2020 to 2022.
Each year there is approximately 10,000 to 20,000 QROPS transfers.