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HMRC Introduces 25% Tax Charge On Some QROPS Transfers
Written by Anthony Blythe of Transfer My UK Pension
The Chancellor of the Exchequer used his Spring Budget to announce that, with effect from 9th March 2017, pension transfers by UK residents to QROPS (Qualifying Recognised Overseas Pension Schemes) not in the European Economic Area will be liable for a 25% tax penalty. Philip Hammond said that this policy was being introduced in the interests of “fairness in the tax system.”
Why has the Chancellor introduced this policy?
This new legislation is aimed primarily at individuals who retire in one country, but “park” their pension in a more tax-friendly location, such as an offshore tax haven. The UK Treasury commented, “This charge is targeted at those seeking to reduce the tax payable by moving their pension wealth to another jurisdiction.”
“There are generally between 10,000 and 20,000 transfers to QROPS each year,” said HMRC. “It is expected that only a minority of these transfers will be subject to this policy.”
How might this affect a UK pension transfer to a QROPS?
The potentially good news is that there are some exemptions to this 25% tax charge. The policy paper states:
This measure ensures that transfers to QROPS requested on or after 9 March 2017 will be taxable unless, from the point of transfer, both the individual and the pension savings are in the same country, both are within the European Economic Area (EEA) or the QROPS is provided by the individual’s employer.
Simply put (as would be the case for Transfer My UK Pension clients), if you are an Australian tax resident and you transfer your UK pension to an Australian QROPS, you are exempt from this tax charge.
As always the devil can be in the details and the HMRC changes also note that funds transferred to a QROPS are now liable to UK tax laws for five years after the date of the transfer. Therefore, if, for example, you moved back to the UK from Australia within that five year period, you could then be liable for the 25% tax charge.
What about SIPPs ?
Transfer My UK Pension is unusual in Australia, in that we also offer our clients the option of moving their UK pension to a Self-Invested Personal Pension (SIPP). Since a SIPP is not a QROPS, SIPP transfers remain unaffected.
Transfer My UK Pension is owned and operated by Anthony Blythe Dip FP, ADFS(FP).
Anthony was born in North London and moved to Australia permanently in 1996. In 1998 he completed his first Australian Financial Planning qualification via Deakin University and became a Financial Planner in 1999. Anthony holds both a Diploma and Advanced Diploma in Financial Planning as well as a specialist Self Managed Superannuation qualification.
Anthony continues to provide advice in the very specific are of UK Pension transfers which combined with his knowledge and practical experience of the Australian superannuation system gives his clients a truly rounded and full advisory service.
As well as providing financial advice since 1999 Anthony is also currently the National Development Manager for Australian AFSL HNW Planning Pty Ltd. In this role Anthony has been involved in adviser compliance, is an alternate member of the AFSL Compliance Committee and a member of the AFSL Complex Investments Sub Committee.
If you would like to know more please contact Anthony at any time. Full contact details and further information are available at www.transfermyukpension.com.au