The Common Reporting Standards set by the EU impose obligations on certain financial institutions to obtain information about clients’ tax residency and are obliged to conform to a set reporting standard.
The parallels with CRS ,and HMRC QROPS rules and the US FATCA are clear, and it is also clear that those that chose to try and manipulate their residency and financial affairs are most likely to get caught out by trustee requirements; it is highly unlikely trustees will risk exposure to fines themselves for lack of reporting. The head of TMP Pensions, Bethell Codrington, has starkly and implicitly laid down the penalties that firms would receive.
We have all seen the QROPS adverts that suggest expats can avoid tax or only be liable for 2.5% tax, if their pensions are in Gibraltar for example. It is worth pointing out that it is not the product that decides the tax, it is the Double Tax Treaty between the tax residency of the client and the jurisdiction where the pension is held.
The new HMRC QROPS rules and reporting requirements are similar to FATCA reporting in that the pension provider may be legally obliged to pass on details of the tax residency of the client to the competent tax authority of residency.
If those with QROPS , that have not disclosed income to their local tax office ( and maybe those in the US who did not inform the IRS of the transfer ), this may give rise to unexpected tax bills. Aisa Group has been warning of exactly this matter for years and have been quoted in many publications citing IRS rules on state to state pension transfers. We are thus concerned for those US residents who have been told different and have transferred to a QROPS.
Duties of QROPS providers
Another important point to consider is that the new CRS in relation to HMRC QROPS , like FATCA, extend to providers too.
In the case of QROPS, there will be a range of fines for non-compliance with the CRS. Some penalties being severe.
Failure to comply includes-
- Repeated failure to file a return or repeated late filing
- Ongoing or repeated failure to register, supply accurate information or establish appropriate governance or due diligence processes
- The intentional provision of substantially incorrect information
- The deliberate or negligent omission of required information.
Summary- HMRC QROPS
If your QROPS provider has asked you to confirm residency, you need to do this during April 2017 or risk being reported to your local tax office under new global transparency rules. Also, if you cannot prove your residency then it is likely it will be assessed as being your domicility until proven otherwise.
For US residents they should seek advice from an international tax lawyer, and for British pensions or QROPS, they should contact us immediately for further information and advice.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 7th April 2017
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