Investors formerly with the defunct Singapore ROSIIP QROPS are challenging a tax demand in the High Court that could see more than half their pension savings disappear.
The group of 37 retirement savers were among more than 120 investors who all transferred pension pots from Britain to the Singapore QROPS only to see the scheme closed down and ruled as illegal by the courts.
Now, under pension rules, HM Revenue and Customs is claiming because they put money into a QROPS that never was, they must cough up at least 55% of the funds they transferred – and for some the bill is nearer 75% when other penalties and interest are added.
The case is set for a three-day hearing before the High Court in London on June 17, 2013.
The argument centres on a QROPS list published by HMRC.
QROPS listing
British pension fund managers cannot transfer money to a QROPS that is not listed.
However, HMRC has claimed in earlier court cases that inclusion on the list does not mean official approval of a QROPS or even that the scheme has been reviewed to make sure it meets the rules.
Instead, QROPS managers self-certify their schemes qualify.
The result is QROPS can be excluded from the list at any time by HMRC if tax inspectors suspect pension rules are being abused or broken.
If this happens, the transferred pension funds are treated as unauthorised withdrawals of retirement savings and face a minimum 55% tax charge.
The ROSIIP investors claim that they would not have transferred their funds to the Singapore QROPS if they had been aware the scheme never qualified as a QROPS, and as such HMRC should have told them or should not claim tax or other penalties.
Tax demands
HMRC argues that the investors should have carried out better due diligence and should shoulder the responsibility for making a mistake.
HMRC has sent tax demands to many of the investors, prompting the court action to try and stay the seizing of their pensions.
Lawyer Robert Waterson, speaking for the investors, said: “The tax man argues says transferring a pension to A QROPS that never passed the qualifying rules is a chargeable tax event. HMRC is considering the action of these investors in this way and has issued them with assessments, which are really tax demands.”
HMRC has declined to comment about the case, saying they do not discuss the tax affairs of individuals.
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