So after ages of consideration, HM Revenue and Customs has finally come back with clarifications on its handling of qualifying recognised overseas pension schemes.
This summer, HMRC suffered an embarrassing legal defeat when a judge ordered it to go away, think about what it had done, and come back after reviewing its Qrops policies.
It eventually came back yesterday (27 November) with fresh ‘guidance’ and an effective amnesty for transfers to schemes made before September 2008 that were restrospectively deemed to be ‘unauthorised’.
It all flows from a case brought by 122 investors to stop the Revenue from seizing 55 per cent of their savings, which they had transferred to a Singapore-based Qrops called Rosiip in 2006 and 2007 when it was on HMRC’s Qrops list.
HMRC, as a caveat added to the list since September 2008 attests, does not vet the list before adding schemes and retrospectively decided the scheme did not qualify. Anyone who had transferred money into it, even during the time it was listed, was hit with the 55 per cent penalty.
When the judge delivered his ruling in June of this year, he called the government’s behaviour “shameful” and “aggressive”, and ordered HMRC to compose a policy statement within 21 days setting down HMRC’s definitive position on Qrops and explaining to the judge why they decided to litigate in the first place.
That statement was apparently not made public, but HMRC has instead now published what must be its “definitive” take on Qrops. Unfortunately, apart from the reprieve for the “small number” of transfers before September 2008, the ‘guidance’ is just as ambiguous as it ever was.
HMRC still says that its list of Qrops may not actually be a list of genuine Qrops. It still says that any of the schemes listed could be taken off the list and that if so the 55 per cent charges could apply.
In fact, it implied that for transfers post-September 2008 it could be more aggressive than ever in pursuing penalties.
I have to say I find it a bit cheeky of HMRC to be so scaldingly rebuked by a judge and then to come back with such a wishy-washy, jargonised response.
I spoke to one of the lawyers who worked on the case, and he pointed out that the new statement is not only just as unclear as their previous garbled guidance, but that there was nothing really new in it anyway.
To be fair, the government does recommend investors look to professional advisers when making their decision, but I have to wonder how many advisers would want this business?
Performing the due diligence on overseas pensions is going to be a tough ask - and with the stakes so high they surely must be concerned at potential complaints if an investor loses half their savings after taking advice if HMRC belatedly decides a listed Qrops is not, in fact, a Qrops.
Bethell Cordington, global head for TMF International Pensions, said: “Effectively, what HMRC is saying is that it is up to the client and his or her adviser to individually check whether an overseas pension scheme complies with the requirements to be a Qrops - self certification - and ensure that the scheme continues to comply with those ever-changing requirements of HMRC and continues to comply with their local domestic regulations.
“If there is any failure, HMRC reserve the right to raise and pursue assessments for ‘unauthorised payment charges.”
At the time of the Rosiip defeat some commentators warned that the short-term victory in the case could lead to a long-term loss in the market if HMRC decided the easiest move was just to ban pension transfers to offshore schemes altogether.
So in a sense the Revenue has been moderate in its response. I suspect for many that will remain cold comfort.
To read FTAdvisers Guide to Qrops and Qnups, click here.
