Qrop transfers hit with 25% tax charge

Qrop transfers hit with 25% tax charge

Chancellor Philip Hammond committed to tackling abuse of foreign pension schemes as part of his measures to address tax avoidance.

Mr Hammond announced in his Spring Budget a number of measures to tackle non-compliance on taxes, including a focus on abuse of foreign pension schemes.

Other measures will include introducing UK VAT on roaming telecom schemes and adding new financial penalties for professionals who enable a tax avoidance arrangement that is later defeated by HMRC.

The chancellor estimated that these measures will raise an additional £830m.

Mr Hammond told the house the UK has the lowest tax gap in the world “but there is more that we can do”.

A 25 per cent charge on qualified recognised overseas schemes (Qrops) for those looking to move their pension overseas is set to be introduced.

The Budget document stated: “The government will introduce a 25 per cent charge on transfers to Qrops.

"This charge is targeted at those seeking to reduce the tax payable by moving their pension wealth to another jurisdiction.

"Exceptions will apply to the charge allowing transfers to be made tax-free where people have a genuine need to transfer their pension, including when the individual and the pension are both located within the European Economic Area.”

It revealed that the government’s targeted charge on Qrops is expected to raise £65m in 2017 to 2018, £60m in both 2018 to 2019 and 2019 to 2020, and £65 in both 2020 to 2021 and 2021 to 2022.

FTAdviser reported earlier this year that enquiries into overseas pension transfers had surged post-Brexit ahead of the imminent triggering of Article 50.

HMRC has since announced that it will close its online service for managing qualified recognised overseas schemes (Qrops) this month, meaning that those using Qrops will need to use the existing physical forms and reference materials.