Guernsey's tax office is set to restrict Guernsey-based QROPS, while other jurisdictions are expected to follow suit, according to Baker Tilly.
HMRC has been concerned about the uses to which qualifying recognised overseas pension schemes (QROPS) might be put. It is especially wary of the possibilities for using the schemes to accumulate tax-preferred funds from the UK before paying tax-free benefits following a period of UK residence.
Baker Tilly said the same rules must apply to residents and non-residents, ensuring any lump sum payments would be limited to 25% of the fund, among other restrictions of Guernsey’s proposed QROPS clampdown.
“Where a transfer of funds held on behalf of a non-resident which originated from a UK approved pension fund is made out of such a scheme to a scheme outside of Guernsey, that scheme should either have QROPS approval or have provisions in respect of benefits that are no more generous than the scheme transferring the funds,” it said.
Therefore, 100% commutation would not be allowed, added the tax specialist.
The conditions are not intended to apply to existing members of already approved schemes, but to apply to new members admitted to such schemes and to all members of new schemes approved after 27 October 2008.
It believes Guernsey’s announcement may spark others from popular QROPS jurisdictions in the near future.
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