HM Revenue and Customs will not pursue penalty tax charges for UK pension fund transfers between 6 April and 17 June for KiwiSaver schemes; recognised overseas pensions based in New Zealand.
According to a news alert from New Zealand-based law firm Minter Ellison Rudd Watts, seen by FTAdviser, HMRC advised that this decision is limited to a number of KiwiSaver schemes provided to them during negotiations with Workplace Savings NZ, the New Zealand Inland Revenue’s Policy Advice Division and the New Zealand Financial Markets Authority.
When contacted by FTAdviser, a spokesperson for HMRC said it does not comment on identifiable cases.
The alert, which was published yesterday (24 June), said that it was reached on the facts specific to the relevant KiwiSaver schemes.
It added that HMRC advised Workplace Savings NZ that it will write to the relevant KiwiSaver scheme managers to confirm the decision on those transfers, to request details and confirmation around other pipeline transfers that are not completed.
Confusion surrounding the possibility of additional tax charges began in early May this year, when it became clear that Australian pension schemes and New Zealand KiwiSaver schemes could no longer meet the compliance definition to qualify as a registered overseas pension scheme after a letter sent by HMRC backdated new regulations brought in following the pension reforms.
A letter, dated 17 April, was sent to overseas schemes and backdated regulations to 6 April. Rules for Qrops were changed to ensure access rules were in line with those implemented in April under the retirement freedoms.
At that time, HMRC stated it was seeking confirmation from the schemes that they remain complaint with the rules, as UK savers can not access their pension funds until aged 55. Failure to do so could mean transfers-in are treated as unauthorised payments, therefore hit with a retrospective 55 per cent tax charge.
In late May this year, a number of KiwiSaver schemes disappeared from the latest recognised overseas pensions list published by HMRC, which meant transfers to the schemes would be likely to attract unauthorised tax charges of 55 per cent, with potential for further penalty fines.
Bethell Codrington, global head for international pensions at TMF Group, said that this latest move has far reaching ramifications. “If a deal is being cut with NZ, presumably Australia, Ireland and Canada, to name a few jurisdictions, will be afforded the same opportunity.
“What signal does this send to those jurisdictions that took exceptional steps to be compliant in April? Whilst this may seem a pragmatic step by many, it potentially sets a precedent others may seek to take advantage of.”
He added that those schemes de-listing from the Rops’ list also have an obligation to report to HMRC.
“What it seems, is that HMRC are allowing NZ retrospective de-listing for those who ‘forgot’ their obligations of having applied for a Qrops reference number, and did not check the new statutory instruments, letting members and ceding schemes off penalty tax charges,” explained Mr Codrington.
Earlier this month, FTAdviser revealed that a number of Irish pension schemes, which market themselves to UK savers seeking to transfer tax-relieved savings, had pulled out of the market in the wake of a HMRC clampdown on age-related access concessions.
This followed fresh fears the changes to rules following new retirement freedoms coming into force could impact Irish schemes, which under national laws allow savers in some circumstances to take early retirement and access funds at age 50.
ruth.gillbe@ft.com
