There has been considerable confusion and unfortunately - in some cases - misinformation circulated by those with vested interests regarding the proposed changes to the regime for Qualifying Recognised Overseas Pension Schemes (QROPS), announced by HMRC on 6 December 2012. There have been varied reactions regarding the prospects for schemes that may lose QROPS status as well as different or slow responses from the various QROPS territories to these proposed changes.
The HMRC requested consultation period ended on 31 January 2012. It is expected that the final Government response will be published simultaneously with the Chancellor’s Budget statement on Wednesday 21 March 2012.
The fact that the original consultation document included draft secondary legislation combined with the short consultation period would suggest that there is momentum to see these changes implemented, close to those suggested announced in the draft proposals.
The main proposed changes are:-
I. The introduction of a new condition for QROPS qualification – that any exemption regarding the taxation of benefits for non-residents must also be available to residents in the territory in which the QROPS is based. This affects existing arrangements in Guernsey, The Isle of Man, Gibraltar and – depending upon the structure adopted - in Malta as well.
II. Revised reporting requirements for all QROPS. It is proposed that the reporting period will be changed from the first five full fiscal years after the member becomes non-resident to 10 years from the date of transfer to the QROPS. This will affect all existing QROPS wherever they are based.
III. Measures to prevent transfers to schemes which permit 100% commutation which HMRC views as against the spirit of the QROPS regime. This affects arrangements in New Zealand in particular.
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