QROPS News Update. Guernsey to Fight Unfair QROPS Rules
QROPS News: Guernsey are to fight the unfair rules that HMRC have drafted for QROPS on April 6th, 2012. Guernsey, who have a clean record with regards to QROPS find themselves in an awkward position following HMRC imposing “Condition 4” which means that residents and non-residents in any jurisdiction should be taxed the same in order for a QROPS scheme to be approved. HMRC are basically holding Guernsey to ransom and imposing tax laws on the island that the local government don’t want. Guernsey are trying to fight the legislation from going through, but if it does, they have a plan in place already. The new rules were impsed due to pension busting schemes which took place in Hong Kong, Singapore and New Zealand. These new rules will tighten up the holes and hopefully make QROPS pension transfers more secure.
QROPS News Update. Guernsey have already put plans in pace for the new rules.
After a six month consultation with industry experts, HMRC proposed “Condition 4” as a way to protect individuals with QROPS by introducing clearer and more and accountable regulations.
If enacted, “Condition 4” would mean that Guernsey residents and non-residents would pay the same amount of tax on QROPS pensions. As QROPS are primarily designed for Expats i.e. individuals who are resident in one country but domiciled in another, QROPS providers in Guernsey are lobbying HMRC to exempt Guernsey from “Condition 4”. They argue that this rule runs counter to the purpose of QROPS, will have no added benefit for HMRC and unnecessarily punishes Guernsey, the QROPS jurisdiction with the strictest guidelines on client protection.
While Guernsey QROPS providers continue to fight the proposed changes, they have simultaneously drawn up a contingency plan. This plan involves a new pension scheme that would meet the requirements of “Condition 4”, called Section 157(E). Though it is possible to make Guernsey QROPS compliant with “Condition 4”, providers are reluctant to do so as it means a higher rate of tax on members, something providers fear will damage the market.
In order to enact this new pension scheme draft legislation has been submitted to the island’s government, which will debate it on the 7th of March. If the bill is passed the new legislation and offshore pension scheme will be enacted prior to HMRC’s new regulations coming into force on the 5th of April.
The key features of the new pension scheme are:
Each new Guernsey pension scheme will need to be approved by States of Guernsey Income Tax office
Open to Guernsey residents and non-residents
No tax on the payment of benefits to members regardless of residence
No tax on investment income
Members of an existing scheme can transfer to the new 157(E) scheme and receive the following benefits:
No contribution limits
Normal retirement age still 55
Maximum 30% lump sum
No upper age limit on taking benefits
Transfers from other Guernsey pension schemes will be subject to 20% tax on Guernsey tax relieved funds
For more info and QROPS news updates, please contact firstname.lastname@example.orgQROPS News Update. Guernsey to Fight Unfair QROPS Rules by Richard Malpass