A overseas QROPS pension is for retirement planning and the HMRC will not tolerate abuse of this
QROPS tax cheats can expect no mercy from HMRC. The UK tax man is ready to repel QROPS pirates manipulating the offshore retirement schemes to extract pension cash.
Documents published alongside Chancellor George Osborne’s Budget 2012 speech, leave no doubt about HM Revenue & Customs hard line on pensions cheats.
Besides confirming a list of expected QROPS pension rule changes, he has also fired a warning shot across the bows of any offshore financial centre offering QROPS pensions to former UK residents that give ‘unintended’ tax advantages.
“Where the country or territory in which a QROPS is established makes legislation or otherwise creates or uses a pension scheme to provide tax advantages that are not intended or available under the QROPS rules, the government will act so that the relevant types of pension scheme in those countries or territories will be excluded from being QROPS,” said a spokesman.
HMRC clamp down for the better
Under HMRC’s new robust anti-avoidance stance, offshore centres can expect close scrutiny to ensure they comply with the rules.
Retirement savers with cash in QROPS that break the rules can expect to pay tax penalties of at least 55% of the value of the funds they transfer in to the pension.
The new offshore pension regime that takes effect from April 6, 2012, ringfences existing QROPS but is likely to see many providers drop out of the running because their products no longer match HMRC’s minimum.
New Zealand QROPS are banned from offering up to 100% cash back to retirement savers and must safeguard no less than 70% of the funds transferred in to pay pension benefits, which stuffs a lucrative loophole for pension providers.
Third Party QROPS
Also under attack are so-called third party QROPS that are stationed in one offshore centre when the retirement saver lives elsewhere.
From April, these schemes must meet strict conditions that ban two-tier income tax advantages that let non-residents off with 0% tax while residents pay 20% or more.
“Changes in primary legislation will be introduced in Finance Bill 2013 to strengthen reporting requirements and powers of exclusion relating to the QROPS regime. They will support the changes in secondary legislation published for consultation on 6 December 2011,” said HMRC.