Death knell for Qrops

As with most legislative changes, we will not know the full impact until after they have been introduced but, from what we can garner, they could well prove to be the first nail in the Qrops’ coffin.

The proposals, which emerged at the end of last year, would see an alteration in the conditions which pension schemes have to meet in order to qualify for Qrops status.

I have always been of the opinion that if you are an expatriate, Qrops offer a valuable alternative to the UK pension fund, the beauty being that they do not operate within the same limitations.

Indeed, in my experience, investors with UK pension rights seeking better returns have often found that a Qrop is a great way to boost their funds.

Perhaps then unsurprisingly, HMRC is to wield the axe on key areas of this scheme which will cause lasting damage to what has hitherto proved a boon for the pensions industry.

The proposal to make Qrops offer exactly the same tax regime to its members that apply to the country’s residents in which the scheme is domiciled is naturally a controversial one. However, of greater significance is HMRC’s plan to replace the current five year non-resident rule with an altogether stricter 10-year requirement and change the start date to when the pension transfer took place rather than the current method of starting it when the member leaves the UK.

This means expatriates stand to get hit with UK tax rules for 10 years, thereby escalating the costs involved and proving a major obstacle for those who had hoped to benefit from a more tax-efficient environment.

Having created something of value to the consumer, it would now appear that HMRC is keen to destroy it.

It would not surprise me if some individuals who may previously have opted for a Qrop now turn to a Sipp instead.

David Howell

Guardian Wealth Management

London