The freedom to access 100% of funds with an overseas pension will come into place on 6th April 2015, a move which coincides with the same rule change in the UK. Before the rule comes into play however, there is still many loose ends to be tied up by the Treasury.
So far no detail has been released by the Government, although promises have been made to make sure everything is clear by April. Industry experts have begun analysis on exactly how a 100% access model would work across 42 different jurisdictions, and the complexity of such measures, it is thought, may be the reason for the delay in drafting the legislation.
The HMRC rules as they stand state that 70% of a QROPS must remain in the fund after transfer. Once this rule is scrapped, the door may well be opened to new, and ever- imaginative tax avoidance schemes which is of great concern to the Treasury and HMRC.
Which Jurisdiction?
Much will depend on whether the jurisdiction the British pension is to be transferred into has a double taxation agreement in place with the UK. If they do, tax will deducted within the jurisdiction at the marginal rate, and if there is not one in place, the marginal rate will most likely be dictated by the UK. Never before has a DTA been so important to QROPS jurisdictions looking to attract business, and a major player which has no DTA in pace, is the popular destination of Gibraltar.
There are more complications too, for example a third issue could be for those living in a tax-free jurisdiction, with funds placed elsewhere. Drawing 100% of the fund completely free of tax would be seen as a loophole potentially, but these are items up for debate over the next month or two before the rule kicks in.
For detailed advice on all aspects of QROPS, including the forthcoming amendments to the legislation, contact us today.
About John Cassidy
