Guernsey QROPS providers have hit the emergency stop and closed for new business after a warning from the UK tax man that many of their pension schemes break the latest QROPS laws.
HM Revenue & Customs has outlawed Guernsey’s 157e QROPS just 96 hours after new expat pension rules came in to force at a minute past midnight on April 6.
HMRC has reportedly told Guernsey that only resident-only pensions will be recognised as QROPS when the new list of schemes and providers is published on April 12.
The action indicates a clear policy from the UK government against QROPS schemes that break pension rules.
The issue is ‘third party’ QROPS, where the pension investor lives in one country but the QROPS pension is set up and administered in another.
Until the 157e laws came in to affect, offshore financial centres like Guernsey would charge residents one rate of income tax on pension payments and non-residents a different rate – generally 0%.
Guernsey QROPS close for Non Residents
The UK government legislated to stop this ‘abuse’ and Guernsey brought in the 157e rules to run a two-tier pension system.
Although 157e pensions are equally open to residents and non-residents, one set of pensions gives residents tax relief on contributions, while the other meets QROPS rules and does not offer pension relief to non-residents.
HMRC has yet to issue any statement and has a policy of not commenting on QROPS providers or the country where they are based.
However, the UK view seems to be that this is not a satisfactory solution and that QROPS should be open to residents only and not non-residents.
Guernsey Treasury and Resources Minister Deputy Charles Parkinson said: “We have asked HMRC to come back to us with detailed information about their position on 157e schemes. When we have that we will communicate it with our pensions industry immediately.
“While we are disappointed that the UK has taken this action, we are relieved that pension schemes which have already been established in Guernsey will be largely unaffected, except in respect of any further transfers of assets from UK pension funds into those schemes.
“We are working to ensure that future transfers into schemes established for the benefit of Guernsey residents will not be affected by the change in the UK’s stance.”
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