A question of clarity for clients and their financial advisers
The difficulty for financial advisers when considering the current rules is that it can be difficult to predict when and under what circumstances HMRC might interpret a pension transfer as being intended to provide gratuitous benefit.
In some cases, advisers may, through fear of attracting a 40% inheritance tax bill for their client, be hesitant to recommend a pension transfer even if they believe the transaction may be suitable.
In other situations, financial advice clients may decide that consolidating their pensions into a single QROPS, SIPP or other scheme may be the better option when the ambiguity of the rules is taken into consideration.
A deterrent against sensible financial planning
While HMRC states they have pursued only a relatively small number of cases, there has been a sense among industry experts that it has done so chiefly to serve as a deterrent to those in similar circumstances and to present too greater risk in what might otherwise be construed as sensible financial planning.
One recent example is the Court of Appeal case, Her Majesty’s Revenue and Customs v Parry & Ors (also known as the Staveley Case). The case concerned the application of inheritance tax in relation to a pension transfer which was made during a time of ill-health.
The judge, overturning two earlier tribunal decisions, found in favour of HMRC, ruling that because the pension transfer had been made when the pension holder was terminally ill it should be treated as a “chargeable lifetime transfer” that had been made with the purposes of reducing the value of an estate.
It is anticipated that HMRC will publish its new guidance pending the outcome of an appeal in the Supreme Court, to be heard in 2020.
Blacktower Financial Management for expat transfer advice
Blacktower Financial Management works across Europe to help cross-border interested individuals protect, grow and manage their wealth.
One area in which we have particular expertise relates to expat pension transfers, including QROPS and SIPPs. If you would like to consider whether it is your long-term interests to make an expat pension transfer, contact us today so that we can review your pensions, assets and wealth management options.
For more information about how we may be able to help you, contact your local office today.
Disclaimer: Blacktower Financial Management is not a tax adviser and independent tax advice should be sought. The above does not constitute advice and Blacktower makes no recommendation as to the suitability of any products or transactions mentioned..
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
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When I first meet a client it takes time for us to get to know each other, and every single person is different with different needs. However, at the root of those needs is usually the desire to find out how best to keep all those hard earned savings, investments and pensions as tax efficient as possible.