by Paul Beckwith [email protected]
Paul Beckwith is an International Financial Advisor working with Blacktower Financial Management (International) Limited
HMRC has broken its silence on its unexpected decision last month to remove all but three Guernsey QROPS from its list of registered schemes, which was published on April 12.
HMRC’s statement came in the form of an amendment to existing regulations for overseas pension schemes. The amendment effectively declares that pension schemes established in Guernsey under the Island’s new S157E regime, approved in March by Guernsey lawmakers in an effort to accommodate new HMRC rules governing qualifying regulated overseas pension schemes that the Revenue unveiled in December, could not be used for the pensions of non-Guernsey residents.
Guernsey had some 313 QROPS schemes on HMRC’s list prior to the revisions that took effect on April 6, after which just three remained. It was not immediately clear what, if any, effect HMRC’s statement would have on plans being considered by the Guernsey Association of Pension Providers to launch a formal complaint against HMRC for its action in removing most of its members’ schemes from its list.
Coming into force on May 25
According to the HMRC statement, identified on a UK Government legislative website as Statutory Instrument No. 1221 (SI1221), the amendment was “made” on May 3 2012, laid before the House of Commons the next day, and is due to come into force on May 25.
From that date, where a pension scheme “is established in Guernsey and is an exempt pension contract or an exempt pension trust within the meaning of section 157E of the Income Tax (Guernsey) Law, 1975(a), the scheme must not be open to non-residents of Guernsey,” HMRC said in its statement.
As conceived by Guernsey lawmakers, the new S157E pensions regime had been designed as a “one-size-fits-all” pension that could be open to Islanders and non-residents alike, with no Guernsey tax due on benefits paid in order to address HMRC’s concerns.
The SI makes no attempt to explain why S157E schemes are not acceptable, it simply says they cannot be open to non-residents of Guernsey. There can be no doubt now, in anyone’s mind, that S157E was unacceptable to HMRC although we all remain unaware where the difficulty lies.
Technically, it would appear S157E schemes have been QROPS since April 6 2012, in spite of not being listed by HMRC. But from May 25 2012, a S157E open to non-residents of Guernsey will be incapable of technically being a QROPS, due to SI1221.
A leading provider has stated that existing members of Guernsey QROP schemes “are not disadvantaged” by the HMRC decision, and that discussions with HMRC “will continue as will the development of other jurisdictions as QROPS centres”.
New Zealand and EU destinations remain viable. Legislation being considered in the neighbouring Channel Island of Jersey that is aimed at making it possible for Jersey pension administrators to accept transfers of the UK pensions of non-Jersey residents for the first time, which was very similar to S157E, must therefore be assumed to be non-compliant with HMRC’s wishes, and very unlikely to be listed by HMRC if an application were ultimately made by a Jersey provider.
Among most popular destinations
Until the publication of HMRC’s revised QROPS list, Guernsey was one of the three most popular destinations in the world for transfers of QROP schemes from the UK.
According to HMRC data obtained last year through a Freedom of Information Act, Guernsey had been the destination of one in every 10 QROP schemes transferred out of the UK between 2007, the first tax year during which such transfers became possible under the 2006 “A Day” overhaul of the UK’s pension rules, and the middle of June 2011, making it the third most popular jurisdiction overall.
In the first part of 2011, however, Guernsey moved up to first place, ahead of New Zealand and Australia, receiving almost one in every three QROPS transferred out of the UK during the first few months of that year, the Concept Group data showed.
Much of that business is expected to end up in Malta, a relative newcomer to the QROPS business, which was first recognised as a jurisdiction to which UK pensions could be transferred at the end of November 2009.
Gibraltar has published a bill to amend its income tax rules, as it seeks to revive its currently dormant QROPS industry, confirming reports earlier this year that it was considering such a move. The legislation is due to be taken to the Gibraltar Parliament “within four to eight weeks”, according to a statement released earlier this month.
Blacktower Financial Management Group are continuously looking at the new options that are in progress to seek out the best options available for their clients. This facility is not suitable for all expatriates, and we recommend that advice is sought before one makes any commitment. Blacktower Group has offices in the United Kingdom, Gibraltar, Portugal, Spain and France. Blacktower Financial Management (International) Ltd is licensed in Gibraltar by the Financial Services Commission (FSC) License No.00805B Blacktower Financial Management Ltd is Authorised and Regulated in the UK by the Financial Services Authority.
As an Independent Financial Adviser, Blacktower seeks to ensure that our clients receive the advice suitable for their specific circumstances. Please contact us for further details 289 355 685.