Reclaiming the QROPS Transfer Charge - Clarification of Regulations
HM Revenue & Customs has introduced new regulations to make it easier to reclaim the QROPS overseas pension transfer charge. The rules came into effect on April 25, 2019 following a decision by the House of Commons on April 3, 2019.
The Pension Schemes (Information Requirements – Repayment of Overseas Transfer Charge) Regulations 2019* outline the necessary procedures for recovering the charge in cases where it has been incorrectly levied or a change in the member's situation means that the charge is no longer applicable and a retroactive exemption can be applied.
Why is there a charge on QROPS pension transfers
The 25 per cent QROPS pensions transfer charge was originally intended to dissuade retirement savers from utilising a grey taxation area that arose when transferring pensions outside of the UK.
The rules now mean that any person who made an expat pension transfer to the same country in which they are either physically resident or tax resident can claim back the charge. A retirement saver will also qualify for an exemption if they are a member of a sponsored occupational pension which qualifies as a QROPS.
The charge does not apply to transfers made in the European Economic Area; EEA-resident members are allowed to utilise a QROPS based in any other EEA country.
Any retirement saver wishing to reclaim the tax charge should use the correct form to contact HM Revenue & Customs and should provide the following information:
- Member's name, date of birth and principal residential address
- The member's National Insurance number or a statement that they do not have one (unless the member is under 16 or a citizen of a country outside the United Kingdom and is not resident in the United Kingdom)
- The date of the transfer and, if different, the date of the event triggering the liability to pay the charge on the transfer
- The transfer amount
- The date the charge was paid to HMRC
- The circumstances which render the member eligible for exclusion from the charge
- The date of the circumstances mentioned above (f) during the relevant transfer period
- The amount the member is claiming
Incomplete or inaccurate claims for repayment will not be processed by HMRC, so it is vital that members ensure they have organised all the necessary information before beginning the process.
Repayment is made either to the scheme member or to the manager of the scheme which paid the original charge. Although members have previously been able to reclaim the charge, the new regulations clarify and formalise the procedure for doing so. Some QROPS providers have questioned the rationale of having a charge in the first place. However, HMRC maintains it is essential to prevent the use of ‘third party' QROPS transfers to Malta or Gibraltar by members living in countries that do not have their own QROPS.
A memorandum accompanying the draft legislation stated:
"These instruments provide the detail that individuals, pension scheme administrators, pension scheme managers and HMRC need for the process of claiming a repayment of overseas transfer charge in certain specified situations, including who should make that claim and how to make the claim and the repayment. The first instrument also covers the repayment of overseas transfer charge where it was deducted and paid in error. This will enable the right people to make the right claim for overseas transfer charge within the time limits. Without this instrument individuals, pension scheme administrators, pension scheme managers and HMRC would not know the process for claiming or making a repayment." **
Pensions Transfer Advice from Blacktower FM
Blacktower FM works to help you achieve your financial and retirement goals. As part of this service our specialist wealth managers can help you decide whether transferring your pension overseas is the best fit for your circumstances including explaining the benefits and drawbacks of QROPS.
For more information, contact your local Blacktower office today.