If you thought the world of offshore pensions was confusing, it is made even more so by the proliferation of acronyms that has sprung up around it.
The expression QNUPS means Qualifying Non UK Pension Schemes. The expression was born in the summer of 2010, when government regulations clarified that certain types of overseas pension scheme would be exempt from inheritance tax.
Since April 2006 (known as “A” day), thousands of British expats have transferred their pension assets into Qualifying Recognised Overseas Pension Schemes, known as QROPS. These enjoy freedom from UK tax, but until the QNUPS regulations were published there was some uncertainty about whether they all enjoyed freedom from IHT as a matter of course.
Prior to A Day, certain overseas schemes benefited from exemption from IHT. However, the “simplification” measures managed to convey the impression that their IHT exemption was lost.
It is not often that HMRC or the Treasury admits a mistake. But it is even rarer that they admit that a mistake has been made which has had an adverse effect on taxpayers and needs to be rectified. But this is what happened – hence the clarification and explanation of QNUPS.
A QNUPS is not a product in itself. Rather, it is a label that may be conferred to a pension scheme if it meets HMRC’s criteria for exemption from IHT. Given that QROPS meet the definition of QNUPS, they are “safe” from UK IHT, even if you got yours a while ago as the provisions operate retrospectively back to A day.
What about ROPS and OPS?
ROPS (Recognised Overseas Pension Schemes) and OPS (Overseas Pension Schemes) are capable of falling into the QNUPS definition, but it cannot always be assumed that they are exempt from inheritance tax in the same way that you can be sure that a QROPS will be.
From this, it is safe to draw the conclusion that professional advice on overseas pension matters is always essential, to make sure that you fully understand the tax consequences involved.
