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Guernsey disappointed by HMRC’s QROPS stance

HMRC is set to change its regulations to prevent a significant proportion of Guernsey’s pension schemes being recognised as QROPS.

10 April 2012

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HMRC has confirmed that when it republishes its list of approved QROPS on Thursday (12 April 2012) it will only include a Guernsey scheme if it is for ‘Guernsey residents only’, according to a report by Guernsey Finance. In addition, HMRC has indicated that it is set to further change its regulations in order to disqualify Guernsey’s new s157E pension schemes from being recognised as QROPS.

In terms of any disqualified schemes, the action is not retrospective so the development does not affect transfers made at the time when they were QROPS or the UK taxation of the assets in those schemes but it does impact further transfers from UK pension funds.

Fiona Le Poidevin, deputy chief executive of Guernsey Finance, the promotional agency for the Island’s finance industry, said: “At the moment, the situation is very unclear but we are extremely disappointed at what we have heard so far from HMRC. Guernsey has always aimed to comply with HMRC’s regulations and therefore ensure that we continue to provide schemes which satisfy the criteria for being QROPS.

“Indeed, HMRC is updating its list of approved schemes tomorrow and so it will be very interesting to see if only Guernsey schemes are impacted or whether other jurisdictions will find that the further changes coming into effect mean that their schemes are delisted as well.

“In terms of the s157E schemes, we understand it is likely that these will now not be considered compliant. However, what we have not heard from HMRC is on what basis they have made this decision and what the implications will be not just for Guernsey but the QROPS industry more widely. We will be monitoring these developments very closely in the coming days and hopefully this will shed more light not only on the future of the QROPS industry in Guernsey but for all jurisdictions.”

In December last year HMRC launched an eight-week consultation on a series of proposed amendments to the regulations regarding QROPS, with the final proposals outlined in the UK budget and set to take effect from 6 April 2012.

Guernsey providers submitted consultation responses agreeing that changes to tackle abuses were appropriate but lobbied firmly against the introduction of a proposed condition 4, which effectively meant that residents and non-residents must be treated equally in terms of tax on benefits paid within any QROPS scheme.

At the same time, Guernsey moved forward with creating a new category of pension scheme, known as s157E, which, by extending the tax exemption on pension benefits to Guernsey residents, was designed to meet HMRC’s proposed revised criteria for a scheme to be considered a QROPS, said Guernsey Finance’s release.

The final legislation announced in the UK Budget removed condition 4 but introduced new wording to the same effect in that any scheme wishing to be a QROPS from 6 April 2012 must offer equal treatment to residents as non-residents. Guernsey’s parliament, the states of Guernsey, approved its new s157E schemes in early March so that they would be ready for introduction from 6 April 2012.

However, these latest changes from HMRC indicate that a significant proportion of Guernsey pension schemes may now be unable to be recognised as QROPS.

Categorised in:

Tax & Wealth structuring Pensions