QROPS- Restrictions on transfers from November 30th 2021


QROPS

QROPS transfers are mentioned in the conclusions of the DWP into Occupational and Personal Pensions that was published yesterday afternoon.

QROPS- Residency Requirements

I would like to bring your attention to paragraph 60-

DWP accept much of the feedback in the consultation response around concerns about demonstrating and assessing physical residency in the country in which the QROPS is established. The original basis for the residency link was in HMRC’s tax legislation relating to the Overseas Transfer Charge (OTC) on pension transfers to a QROPS. Alongside the change of approach to the residency link detailed below (for it to be considered alongside the red and amber flags), the residency link will now align more closely with the exclusion from the OTC in section 244B of the Finance Act 2004. Where the residency link applies, rather than demonstrating physical residency, as under the proposed residency link, members will have to demonstrate (and transferring schemes assess) their tax residency in the country in which the QROPS is established. Both members and transferring schemes have to do this already in assessing liability for the OTC.

QROPS- Alignment with Section 244B

If we look at Section 244B of the Finance Act 2004, it provides further clarification what that alignment may be.

244B(1)  A recognised transfer to a QROPS is excluded from the overseas transfer charge if during the relevant period–

(a) the member is resident in the country or territory in which the QROPS is established, and

(b) there is no onward transfer–

(i) for which the recognised transfer is the original transfer, and

(ii) which is not excluded from the charge.

244B(2)  If the member is resident in that country or territory at the time of the transfer mentioned in subsection (1), it is to be assumed for the purposes of subsection (1) that the member will be resident in that country or territory during the relevant period; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (1) otherwise than by reason of the memberʼs death–

(a) that assumption is from that time no longer to be made, and

(b) the charge on the transfer is treated as charged at that time.

244B(3)  An onward transfer to a QROPS (“transfer A”) is excluded from the overseas transfer charge if during so much of the relevant period as is after the time of transfer A–

(a) the member is resident in the country or territory in which the QROPS is established, and

(b) there is no subsequent onward transfer that–

(i) is of sums and assets which, in whole or part, directly or indirectly derive from those transferred by transfer A,   and

(ii) is not excluded from the charge.

244B(4)  If the member is resident in that country or territory at the time of transfer A, it is to be assumed for the purposes of subsection (3) that the member will be resident in that country or territory during so much of the relevant period as is after the time of transfer A; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (3) otherwise than by reason of the memberʼs death–

(a) that assumption is from that time no longer to be made, and

(b) the charge on transfer A is treated as charged at that time.

Further clarification is given here

Pension Regulator

Note also that proving residency is not enough, there will be additional checks for tax residency. Further clarification can be found here on the Pension Regulator’s website.

 In these cases, you must check that the member is tax resident in the same country that the receiving scheme is based by obtaining a copy of the member’s formal residency documentation and at least two other items of evidence that demonstrate they have been tax resident for a continuous period of at least six months ending on the date you received the transfer application.

As things stand, the retail market looks like it will be only viable for those resident in Malta and Gibraltar. The rules are set to come into place on 30th November 2021.

 

Article Date 9th November 2021

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.

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