In a statement released last night, the Guernsey Association of Pension Providers said it had a “significant concern that the proposed introduction of new Condition 4, which requires equal tax treatment of QROPS derived pension benefits for residents and non-residents [of a QROPS-managing jurisdiction] will have serious implications for individuals who plan to move from the UK and wish to transfer their UK tax-relieved pensions overseas.”
This, the GAPP statement explained, is because the rule could reduce the ability of Britons moving abroad to find “safe, well-regulated and compliant” jurisdictions – such as Guernsey – and as a result, “could restrict the ability [for jurisdictions] to take overseas transfers to much the same position as applied before A Day in April 2006, which is not in the interests of members of UK pension schemes”.
“Accordingly, GAPP believes that it would be inappropriate to introduce new Condition 4, given that its greatest adverse impact would be upon cooperative and compliant jurisdictions such as Guernsey, which have a proven track record of remaining “good neighbours” with all European countries, including the UK, rather than focusing upon jurisdictions where the abusive behaviour noted by HMRC has been demonstrated,” the statement added.
“Alternatively, if HMRC is committed to the introduction of Condition 4, then GAPP proposes that its introduction should be deferred for at least another year to enable further consideration of its implications and to enable the affected jurisdictions to address any particular concerns of HMRC.
“This would then enable QROPS providers to introduce necessary changes in a more measured way than has been possible given the major new changes proposed with only four months’ notice and with only two months between the end of the consultation period and the implementation date.”
As reported, HM Revenue & Customs last month surprised QROPS providers with a package of proposed changes to the legislation which governs how UK taxpayers may transfer their UK pensions overseas when they move abroad for good.
The proposal sent shockwaves through such financial centres as Guernsey, the Isle of Man and Malta, where QROPS providers have been trying to assess how their businesses are likely to be affected.
A consultation period ends on 31 Jan, with the revised legislation expected to take effect from 6 April.
GAAP officials have said that they have been working closely with Guernsey’s Income Tax Office on a “solution” to the potential problems thrown up by changes to the UK’s Qualifying Recognised Overseas Pension Scheme legislation generally, and Condition 4 in particular.
It is thought that one solution being considered is a change to the island’s tax regulations as they apply to pensions. The QROPS industry is an important one in Guernsey, and the government is thought keen to work with it to enable it to survive and continue to prosper.
According to data obtained by Guernsey-based Concept Group last year from HMRC and reported here, Guernsey has recently taken the lead in QROPS transfers, and ranks among the top three jurisdictions to which UK pensions have been transferred since "A Day" in 2006.
Other jurisdictions with QROPS industries are understood to be wrestling with similar concerns over the proposed HMRC changes, particularly Condition 4, including the Isle of Man.
