“One of HMRC main considerations surrounding Qrops and Qnups is to ensure the schemes are used in line with the initial intended purpose,” says Amin Malik, director of Delta Financial Management.
He adds that HMRC may monitor the use of Qnups as a potential vehicle to avoid paying IHT rather than using such an arrangement as a bona fide saving arrangement for pension purposes.
“HMRC may take exception in cases whereby an investor contributes a sizeable sum into a Qnups when he or she is terminally ill for example.”
Geraint Davies, managing director of Montfort International, says: “HMRC are getting better informed, they are the forerunners on allowing schemes outside the country of control and they cannot be seen to be anything other than delivering top-notch oversight. They cannot turn a blind eye to what has been going on ex-UK.”
Mr Davies predicts that, in time, each country will be given a full examination by HMRC in turn.
“There are also rogue advisers out there and too many schemes that believe to apply to be a Qrops is simply to apply and that is the end of compliance save for the occasional form fill.”
He adds: “HMRC can only get tougher: the 10-year rule means that any Qrops transfer can be opened up – the earliest date when the first Qrops is off the 10 year radar being 6 April 2016.”
Advisers who work around this area have to keep up with developments from the UK tax authority as HMRC have removed jurisdictions from their permitted list of Qrops if they believe the legislation in those countries does not reflect their rules or the spirit of their rules.
For example, Guernsey was removed from the list of permitted Qrops in April 2012 as was Cyprus.
Mr Malik says: “This therefore suggests that HMRC will constantly review their list of permitted Qrops and would not hesitate to take similar action in the future.”
Mr Davies says that the original intention of the HMRC with regard to Qnups might be seen by some to have been taken too far by product providers, as many now offer a Qnup with IHT protection that can be used to hold monies offshore where it is protected from other UK tax assessments.
“I expect action from HMRC if the borders between avoidance and evasion reach breaking point,” Mr Davies adds.
Qrops rules have already been amended in April 2012 so that several schemes that existed prior to April 2012 were unable to comply with the new rules and consequently lost their status.
“Individuals in the ‘defunct’ Qrops can either remain in the current schemes or transfer to different recognised Qrops,” says Mr Malik.
“For those who decide to remain in their current Qrops, they will still have the benefits of a Qrops going forward provided that no additional funds/transfers are added to that Qrops.”