Friday, 2 November 2012

QROPS – Developments & the Future


QROPS Week - Day 5

The last article of QROPS Week deals with the future. QROPS will remain but will they change again? We already know that there are proposals for the Finance Act 2013 but details are sketchy and open to lobbying and change

April 6th 2012

Qualifying Recognised Overseas Pension Schemes (QROPS) started in 2006 and by April 2012 needed an overall and updating. In many peoples minds the ability to take 100% cashout was an abuse of the principle of ‘an income for life’ which underpins pensions, generally.

To make it absolutely clear and to contradict adverts I have seen there is no longer an opportunity to use QROPS to withdraw 100% as cash.

Another major change was an abuse, as the UK Government and tax authorities (HMRC) saw it, of jurisdictions constructing local tax regimes to attract QROPS. Now, they have to treat local resident members the same as non-residents.

The effect of these changes, along with other detailed requirements, have changed QROPS.



I would like to look at the affect on some jurisdictions and speculate on how this could change in the future.

Guernsey

Without question, from the commencement of QROPS until April 6th 2012, Guernsey was the market leader in QROPS. Guernsey acted quickly in 2006, to establish the right environment for QROPS, and its industry grew very quickly. HMRC however was always concerned that the local tax regime had been constructed to attract QROPS and when the 2012 changes were made, Guernsey had over 300 schemes removed from it’s approved list.

Whilst it is known that Guernsey is working hard with HMRC to get QROPS re-instated, it is by no means sure that they will be successful.


Gibraltar

Long before April 2012, Gibraltar had voluntarily withdrawn from QROPS over concerns about the taxation of pension income. These concerns have been overcome through direct negotiations between local officials and HMRC.

There is currently a limited choice of providers but there are schemes up and running. The position of Gibraltar is interesting to expats in Spain. There is a two-fold debate that I’ve heard;

Gibraltar is convenient, we like the territory and as long as the scheme is approved we are happy with it
or
There is no way I’m taking my pension income from Gibraltar and reporting it on my Spanish tax return.

Email me if you have a view or want to know more about Gibraltar QROPS.


Cyprus

Soon after April 2012, Cyprus had all of its QROPS removed by HMRC from the approved list.

Unlike Guernsey, it is more likely that terms will be agreed to enable Cyprus QROPS to be re-established. Membership of the EU is likely to prove crucial.


Switzerland

The 2012 changes have worked to Switzerland’s advantage. There is a tax deduction on proceeds for both residents and non-residents. As one of the world’s leading financial centres, Switzerland did not need to ‘construct’ a QROPS industry. In keeping with its general philosopht, they want high value, high quality cases and NOT the volume which proved the attraction to other jurisdictions.

More details are available from the QROPS Week series, please refer to Switzerland Also don’t hesitate to contact me for more information but I will need to pre-check some personal details, as the Swiss are very selective!


New Zealand

Before April 2012, New Zealand was best known as a jurisdiction which allowed 100% cashouts. HMRC received much lobbying from other jurisdictions to unapprove all of the New Zealand schemes.

But New Zealand changed its own rules to comply with HMRC, and has now a QROPS philosophy which is generally well accepted. Some of those who campaigned AGAINST New Zealand, have seen their own schemes unapproved. Irony!



The Future

QROPS has a future! At this time twelve months ago, I wasn’t so certain. April 6th 2012 changes have brought quality to the market and although there will be changes ahead, I think the future is more secure.

But I caution against procrastination as changes cause uncertainty. Better to act now than to risk that the scheme you want disappears. Email me for personal information.

If changes are announced in the UK Autumn Statement, on December 5th, I will publish them here.



David Goodall
Financial Pages in Spain