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HMRC issues draft legislation in its Overseas Pensions Regulations 2012
On Tuesday 6 December, HMRC issued draft legislation in the form of the Overseas Pensions Regulations 2012. The new proposed rules and regulations are due to come into force as of 6 April 2012 and will affect many expatriate, non-domicile and UK resident individuals who are considering moving overseas. There is a consultation period up until 31 January 2012, although in the form that the legislation has been drafted, this is unlikely to be amended.
In practical terms these new regulations may affect individuals in the following ways:
The timing of any transfer of a UK pension overseas
The location where they transfer their UK pension
The need to review any existing QROPS arrangements
The 2 key changes are as follows:
1) Reporting Period
Currently a QROPS provider is required to report any distributions an individual takes from the scheme, for the first 5 tax years in which the individual is non-UK tax resident. From 6 April 2012 this is proposed to change to 10 years from the date of transfer.
2) QROPS Qualification Rules
In order to continue to comply to be a QROPS post 5 April 2012, a scheme must now meet new condition 4.
In brief, this requires that if a QROPS jurisdiction taxes local residents, then payments to non-residents will also need to be taxed at that same rate. An exemption to this is where the QROPS jurisdiction has a double tax treaty with the individual’s country of residence.
STM created a multijurisdictional QROPS Wrap several years ago to deal specifically with changes in legislation such as this. With schemes in Malta, Gibraltar, Guernsey, Isle of Man and New Zealand (either directly or by association) the Wrap allowed the member to decide the best jurisdiction for their needs which, should circumstances change or legislation change, they would be free to move within the Wrap without exit penalties or setting up charges.
Following the proposed changes STM will re-examine the advantages/disadvantages of each jurisdiction in particular the existence of double taxation agreements and the levels of taxation.
STM will issue an updated, jurisdictional comparison shortly. In the meantime please feel free to call us on 00350 200 51356 to discuss the potential issues for each jurisdiction as a result of these changes.
