Investors of Delisted Singapore QROPS Panthera Scheme Take Taxman to Court
Dorsey & Whitney, the lead solicitors acting for a group of investors who had transferred their UK pensions to the Panthera ROSIIP scheme in Singapore in 2008. The Singapore based group transferred pensions from the UK to their QROPS scheme for more than 100 members. HMRC’s decision to delist the QROPS has meant that the members have been left facing tax bills of up to 55% of their pension transfer value for an ‘unauthorized’ transfer.
Transfers into a recognized QROPS Scheme avoid taxes upon death of 55% which are imposed in the UK as well as UK income taxes. However, schemes which are unauthorized face a 55% tax. As Panthera lost its qualifying status, members face a having lost its qualifying status, the members now face a tax charge of 40% along with a 15% penalty, based on fund values.
In April this year, the Inland Revenue started issuing assessments demanding tax payments from members of the Panthera ROSIIP scheme. The charges even amount to more than the current total value of their pension pots for some individuals.
Aggrieved members have now been given the right to take HMRC to the High Court to challenge the delisting and subsequent tax demands.
The case is based on a “legitimate expectation” that transfers to the QROPS scheme would not attract any unauthorised payment charges. Furthermore, the group is arguing the retrospective tax claim breaches European law.
Robert Waterson, an associate at Dorsey & Whitney, the lead solicitors acting for the group, said: “Almost all of our clients are retired or soon to be retired expats whose plans for retirement, through no fault on their part, have been placed in serious jeopardy by HMRC’s actions.”
The Panthera ROSIIP QROPS had been on HMRC’s list of qualifying funds for about 14 months before the tax regulator withdrew it. HMRC says the trustees of the fund made errors in foreign law on the application form when they originally applied.
The group claims however that by placing the ROSIIP fund on the list of qualifying funds and by leaving it on that list for 14 months, HMRC gave a legitimate expectation that it would not raise charges upon transfers into the fund.
Because the High Court has granted a group litigation order (GLO) to combine the judicial review applications issued by pension holders, the claimants will be able to share resources and costs in fighting the retrospective charges.
What Affect Will this have on the Future of QROPS?
The new laws which came into affect in April 6, 2012 should stabilize the QROPS market and it is now clear to trustees what is allowed. Malta and New Zealand are now becoming the popular choice as they have Double Taxation Agreements (DTA’s) with many countries that expats choose to live in. Expats do not have to move their pension to the country that they live in. They can hold it in a jurisdiction which has a DTA with a country that they live in to avoid tax.
For example, if you are living in Singapore, you could transfer your UK pension into a scheme in Malta where it would grow free from tax and be paid gross. You then avoid the 55% tax upon death in the UK and UK income taxes. Then, you would only pay Singapore income tax on your pension upon drawdown.
Many QROPS trustees will now allow a free transfer in from other schemes. So, if you have a QROPS which has been delisted, please conatact us to see if we can help.
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