There has been quite a surge in people retiring abroad, outside of the UK tax regime, and away from the need to buy a UK retirement annuity, as is the custom on these shores. In Guernsey there is a clampdown on QROPS.
Guernsey’s tax office is set to restrict Guernsey-based QROPS, while other foreign jurisdictions are expected to follow suit, according to experts, Baker Tilly.
Her Majesty’s Revenue and Customs (HMRC) has been concerned about the uses made of qualifying recognised overseas pension schemes (QROPS). It is especially wary of the possibilities for using QROPS to accumulate tax-preferred funds from the UK before paying tax-free benefits following a period of UK residence.
Baker Tilly said the same rules must apply to residents and non-residents, ensuring any lump sum payments would be limited to 25% of the QROPS fund, among other restrictions of Guernsey’s proposed QROPS clampdown.
100% commutation would not be allowed, added the tax specialist.
The conditions are not intended to apply to existing members of already approved QROPS, but to apply to new members admitted to such schemes and to all members of new schemes approved after 27 October this year.
Baker Tilly Guernsey’s announcement may spark others from popular QROPS jurisdictions in the near future.
So, if you are intending retiring abroad and looking for the tax breaks, you’d better see how the land lies first.