HM Revenue and Customs could face further legal action following its humiliating defeat over Rosiip, a Singapore-based qualified recognised overseas pension, according to a law firm that was involved in the case.
Earlier this year a judge ruled that HMRC had to clarify its stance on what is and is not a qualifying registered overseas pension scheme and offered strong criticism of its attempts to pursue unauthorised payment charges against investors in the Rosiip scheme.
HMRC withdrew from the case and has said it will pay the investor group’s legal costs. It also published guidance that confirmed it would not pursue any transfers made before September 2008 which were retrospectively deemed unauthorised.
In September 2008 a caveat was added to the Revenue’s Qrops list confirming that the schemes listed are simply those that have registered with HMRC and that they are subject to retrospective checks to ensure compliance and could be subsequently removed.
HMRC said it reserves the right to pursue claims over transfers made after this caveat was added where a scheme has been removed from the list, as well as those from prior to this date where there is evidence of “dishonesty, abuse, artificiality or any similar circumstances”.
Making an unauthorised pension transfer can result in tax charges of 55 per cent, with the charges rising to as much as 70 per cent if other penalties are added.
Helen McGhee, associate and chartered tax adviser at Squire Sanders, a law firm involved with the Rosiip case, said that the end of this case could encourage others to come forward with cases who were previously “waiting in the wings” to see how the Rosiip case turned out.
In particular she highlighted potential cases involving Hong Kong-based schemes, which she said was in a similar position to Singapore in that the tax system is not “amenable” to Qrops.
Ms McGhee said: “There might be more litigation. The revenue took all these other Qrops off the list. If other cases have been parked, waiting on the outcome of this, they might go forward.
“I know that Hong Kong will be in a similar position to Singapore. Hong Kong’s tax system isn’t amenable to having Qrops there. They might be similarly dissatisfied.”
However, she added that HMRC has largely dodged any public outcry due to justice Charles deciding not to publish the judgement.
“He certainly all throughout the hearing was hugely critical of HMRC and how shocking it was that they see this as a fair way to administer tax.
“It’s disappointing because the pensions industry would like to be in a much better position than they are now because what we have now is a self-assessment system. You have to decide if the fund is a Qrops or not and that’s a ridiculous proposition.”
She added that although the new guidance could drive people to seek advice, advisers could face more intense scrutiny when advising on whether or not a given fund counts as a Qrops.