New charge on certain transfers to overseas pension.. | KPMG | UK

New charge on certain transfers to overseas pension schemes

New charge on certain transfers to overseas pension..

The Government has announced a 25 percent tax charge on certain transfers to overseas pension schemes.

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For a transfer payment from a registered pension scheme to be an authorised payment it must be paid to another registered pension scheme or to a qualifying recognised overseas pension scheme (QROPS). A QROPS must meet certain conditions (which confirm that the scheme is broadly similar to a UK registered pension scheme) and must undertake to provide information to HMRC when benefits are paid to members who have transferred from the UK. The Government announced at Spring Budget 2017 that certain transfers to and from QROPS requested after 8 March 2017 will be subject to a new 25 percent tax charge – the overseas transfer charge.

Transfers from registered pension schemes

For overseas transfers from a registered pension scheme requested after 8 March 2017 the overseas transfer charge applies if none of these conditions is met:

  1. The member is resident in the same country in which the QROPS is established;
  2. The member is resident in a country within the European Economic Area (EEA) and the QROPS is established in a country within the EEA;
  3. The QROPS is set up by an international organisation for the purpose of providing benefits for or in respect of past service as an employee of the organisation and the member is an employee of that international organisation;
  4. The QROPS is an overseas public service pension scheme and the member is an employee of an employer that participates in the scheme; and
  5. The QROPS is an occupational pension scheme and the member is an employee of a sponsoring employee under the scheme.

The overseas transfer charge will also be payable if the member has not provided the scheme administrator with all the required prescribed information before the transfer is made.

Onward transfers from QROPS

The overseas transfer charge will also apply to onward transfers from a QROPS or former QROPS to another QROPS if it is made in the same tax year as the original transfer or any of the five subsequent tax years.

Quarantine period

Transfers that were not originally caught can be subject to the overseas transfer charge. If at the time of the transfer conditions 1 and 2 above are met, but after the transfer circumstances change so that neither of these conditions are met, the overseas transfer charge will arise. This will apply if the circumstances change within the tax year of transfer or any of the following five tax years.

When has a transfer request been made?

A transfer request has been made when the member has received a cash equivalent transfer value and has asked the scheme to make a transfer of all or part of the quoted amount to a named overseas pension scheme. So the new rules apply to any individuals who had requested a cash equivalent transfer value prior to 9 March 2017 but had not yet asked the trustees to make the transfer payment.

 

For further information please contact :

Simon Mayho

Andrew Scrimshaw

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