Consequently, on 6 December 2011, HMRC released a consultation document on the proposed changes to the QROPS regime with the final regulations being released on Budget Day 2012.
The new UK legislation can broadly be split into five main categories:
- Member declaration and acknowledgement
- Reporting requirements for UK registered pension schemes
- Strengthening the conditions for a scheme to be a QROPS
- Reporting requirements for QROPS
- Additional HMRC powers
It is the third category which has caused the most ripples. This category emphasises that:
- A QROPS must now be recognised for tax purposes in the country where it is located
- From a tax perspective, a QROPS in a certain location may not be more attractive for non residents than for residents
- Special rule for New Zealand schemes – a New Zealand QROPS (other than a KiwiSaver) must confirm it will use at least 70% of benefits to provide an income
As of midnight on 5 April 2012, the QROPS list on the HMRC website was temporarily suspended, only to return on 12 April with substantially less on there.
Guernsey was hit particularly hard. After reviewing the draft legislation, they had worked hard to introduce new legislation, called 157(E), which ensured both resident members and non-resident members did not have tax deducted at source from their pension. Unfortunately, when the new list was published, only three Guernsey schemes remained. It was evident that HMRC were not happy with the 157(E) schemes.
The fact remains, however, that many of the Guernsey schemes removed from the QROPS list are in fact still QROPS. They remain as such until their status is revoked by HMRC and there is a formal process for this to happen. At the time of writing that process does not appear to have been activated. It can only then be presumed that the schemes have been suspended from the HMRC QROPS list under the new ‘temporary suspension’ powers introduced by SI 2012/884.
The Isle of Man’s 50c pension schemes failed the newly introduced ‘benefits exemption test’ because resident members are currently taxed, whereas non Isle of Man resident members receive their payments gross.
The special requirement on New Zealand QROPS that at least 70% of the fund must be used to buy a pension income has left many providers in a difficult position, because this had not been included in their trust deeds. Consequently, many schemes have been removed from the list.
With over 59 double taxation agreements, Malta has remained largely unaffected by the regulatory changes to QROPS. Malta has a Pensions Regulator (The Malta Financial Services Authority) and is a member of the European Union, meaning that HMRC cannot be too draconian with them.
Third country QROPS are clearly something that HMRC is not happy about, and there can be little doubt that QROPS providers will be under much closer scrutiny going forward, which means that it will be impossible to rule out further legislative changes.
