QROPS, Will Gibraltar be welcomed back into the QROPS fold?
Gibraltar has long been a popular destination for investors. Being a British Overseas Territory, it benefits from the protection of the UK, but also enjoys the freedoms of self-government and the ability to set its own tax regime.
It is that financial freedom that concerns the UK taxman when it comes to Gibraltar and QROPS. Qualified Recognised Overseas Pension Schemes are foreign funds that non-resident UK scheme members can transfer their pension pots into, without paying any UK tax. To qualify as a QROPS, schemes must regulate treat (and tax) their pensions in a way that satisfies HMRC.
In Gibraltar there has historically been a standard 0% tax rate for the over 60s. This did not satisfy HMRC, as it was seen to be inconsistent with the spirit of QROPS. Accordingly, Gibraltar pension trustees themselves have voluntarily suspended incoming transfers of UK since last summer amid rumours that the country was going to be removed from the HMRC list of approved destinations.
In the meantime, Gibraltar QROPS providers have joined together to speak to the UK taxman about this impasse. It is believed that the taxman wants a higher rate for wealthier investors to be introduced before he approves Gibraltar as a QROPS destination, whilst the Gibraltar authorities want to retain their competitiveness as an investment location and keep the rate as low as possible. The solution to the problem will probably be an amendment to the tax law in Gibraltar.
The UK Treasury’s decision to focus on Gibraltar is bizarre for two reasons. Firstly, there is nothing for them to gain in Gibraltar taxing their pension scheme payouts. The revenue would go into Gibraltar’s coffers. Secondly, why pick on this jurisdiction, when there are a variety of ways to secure an offshore tax free pension out there that the taxman has smiled upon?
Despite serious indications from reliable sources of an agreement being reaches, no firm announcement has come from either Gibraltar chief minister Peter Caruana or the UK Treasury, leaving the Gibraltar financial services community in a state of high anticipation about the future. Former QROPS providers like the STM Group have been vociferous in their criticism of the UK Treasury’s delay in bringing the matter to a conclusion, claiming that their profits have suffered considerably.
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