If you leave the United Kingdom for your retirement, it may be easy to assume that you and your assets are outside of HMRC’s “net” for all kinds of taxes. However, unless you have made special arrangements, HMRC may be able to charge inheritance tax on your pension fund.
Some decades ago, it used to be the case that only the very rich paid inheritance tax. However, if you have paid off the mortgage on a modest family home, the chances are that the increase in value of the building you have worked hard to pay for all of your life has pushed your estate above the IHT threshold.
There are a number of steps that you can take to reduce your IHT bill. Depending on your circumstances, you may have considered making gifts or setting up trusts to redistribute your assets.
If you have moved abroad or are thinking of doing so, then a QNUPS may be well worth considering.
A QNUPS is a Qualifying Non UK Pension Scheme. These were introduced in 2010, and are exempt from UK inheritance tax, as long as the scheme meets certain terms and conditions.
How do QNUPS differ from their older relation, the QROPS? If you have been researching the possibility of getting one, you may have come across QROPS on the internet or in marketing material.
QROPS are all QNUPS, which means that they are all foreign pension schemes that are taxed and regulated as pensions in their own countries. Individually assessed by HMRC, they must continue to meet these criteria to retain their UK tax free status.
However, unlike QROPS, QNUPS do not need to be in countries with double taxation agreements with the United Kingdom. This means that QNUPS do not have the same reporting requirements as QROPS (where the activities of your pension are reported back to HMRC).
From an IHT perspective, QNUPS benefit from IHT exemption for pension assets that have been transferred from a UK pension (and as such have been tax relieved when they were contributed), and those that have been contributed by someone who used to reside in the United Kingdom.
