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Income Tax Office (ITO) obtains important clarification from HMRC on QROPS

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Wednesday 30 May 2012

Last month, it was announced that Guernsey pension schemes, appearing on HMRC's published list as QROPS, were in danger of being de-listed unless they were explicitly prohibited, under the rules of the scheme, from having members who do not live in the island. The effect of de-listing is that a Guernsey scheme may encounter difficulties in receiving pension transfers from the UK (such as when a new employee moves to the island from the UK).

Under HMRC's initial approach, it did not matter whether or not a scheme actually had any non-resident members. The question was simply whether they could admit non-resident members.

Local pension experts advised the ITO that it is not common practice for Guernsey schemes - nor indeed UK pension schemes - to have such territorial limitations.

Those schemes which did prohibit non-residents from being members were urged to contact the ITO as a matter of urgency so that the ITO could arrange, with HMRC, for their QROPS status to be preserved. In the event, only a handful of Guernsey schemes contacted the ITO and when the list was republished, on 12 April, only 3 Guernsey schemes remained.

To help protect Guernsey schemes, the ITO has been pressing HMRC to relax its stance on de-listing.  As a consequence, HMRC initially confirmed that, if a scheme made a rule change to the effect that, from the date of the change, no future members could be non resident, its QROPS status would be reinstated. Some Guernsey schemes took advantage of that.

Most recently, HMRC has confirmed that if a section 150 scheme (an employer sponsored scheme) is able to confirm to HMRC that;

    A.   the purpose of the scheme is to provide benefits for employees of the relevant employer and

    B.   the relevant employer only employs people in Guernsey,

(the consequence of which is that all pensions arising will be taxable in Guernsey, irrespective of where the recipient may live when the pension is paid) the scheme's QROPS status will be reinstated.

HMRC have also confirmed that the States public sector schemes are to be relisted as QROPS.

Director of Income Tax, Rob Gray said;

"We have been working hard over the last few weeks to protect the QROPS status of purely domestic Guernsey schemes which have been caught up in the action taken by HMRC. I am delighted that HMRC has recognised and accepted the arguments that we have made. These clarifications, which widen the approach originally taken by HMRC, should enable Guernsey schemes that were only ever set up for Guernsey based employees to continue to be QROPS.

We understand that HMRC has written to all Guernsey pension schemes asking them to advise HMRC if they feel the pension scheme still meets the conditions to be a QROPS. Whilst when this issue first arose, and in view of the short notice given by HMRC, I agreed to act as a conduit for sending correspondence on QROPS to HMRC, as the time pressure has now passed, I would ask pension schemes to once again correspond directly with HMRC on QROPS matters.

Talks with HMRC are ongoing regarding Guernsey schemes that have members resident in the other Crown Dependencies (the Isle of Man and Jersey) as well as other aspects of QROPS."

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