04 May 2017
The Chancellor in his recent budget on 9 March 2017, announced that HM Revenue & Customs (HMRC) will introduce a 25% tax charge on Qualifying Recognised Overseas Pension Schemes (QROPS) transfers for members not in the European Economic Area (EEA), unless certain conditions apply.
The tax charge, which will be deducted before the transfer payment is made, will apply to transfers made to QROPS on or after 9 March 2017.
The government also intends to apply UK tax rules to payments from funds that have had UK tax relief but are then transferred to a QROPS on or after 6 April 2017. UK tax rules will apply to any payments made in the first five tax years following the transfer, regardless of whether the individual is or has been UK resident in that period.
The overseas tax charge is also expected to apply in certain circumstances when an onward transfer is made from a QROPS to another QROPS.
HMRC advised ‘there are generally between 10,000 and 20,000 transfers to QROPS each year and the introduction of this tax charge is expected to provide the Treasury with approximately £60 million each year’.
The member and the Trustee will have joint liability for ensuring the overseas transfer charge is paid.