QROPS property investors face 70% tax penalties

Hundreds of QROPS investors could face massive tax penalties because they have allegedly had incorrect advice that they can invest their pension funds in residential property.

Following HM Revenue and Custom’s updated guidance highlighting investments policy for QROPS, several QROPS advisors seem to have landed clients with tax bills of up to 70% of the value of residential property holdings.

The problem arises from the QROPS.net’s understanding of HMRC rules.

In several cases, it is believed a number of QROPS providers have had investment strategies written off by barristers who have advised that the rules allowed the funds to invest in residential property.

Now, HMRC has confirmed this is an incorrect interpretation of the rules.

Anyone considering investing in residential property via their QROPS should take advice from a UK regulated, independent financial advisor before opening their QROPS scheme or investing in the property.

If the QROPS advisor is regulated in the UK that means the individual or firm is governed by the rules of the Financial Services Authority and subject to a code of conduct and complaints procedure over the quality and accuracy of the advice.

Anyone with a QROPS holding residential property needs to review their tax status urgently to try and mitigate any penalties.

Residential property includes timeshares and fractional ownership properties that give the owners rights to stay for several weeks in the year.

Most large QROPS providers are believed not to have allowed residential property investments, but several QROPS schemes are known to promote it as a permissible asset.     

‘This really highlights the fact that any obvious manipulation of the clearly defined QROPS Provisions from HMRC can certainly be fraught with problems with often severe consequences. Independent and qualified QROPS advice is becoming more essential than ever’