QROPS pension cheats may face blitz from taxman

Tax cheats abusing the system with QROPS pension schemes may face a clamp down from the UK taxman.

HM Revenue and Customs remains tight-lipped about possible action that may see hundreds of schemes removed from the QROPS register - reducing the available products from about 1,700 down to about 350 schemes.

An HMRC spokesman said tax experts were ‘looking carefully’ at the operation of transfers to QROPS and would act to counter any abuse of scheme rules.

HMRC would not confirm whether ‘clarification’ documents are nearing release to advise providers what actions constitute abuse that may lead to substantial fines and penalties for them and their clients.

These penalties can rise to as much as 55% of any unauthorised transfer or withdrawal of pension funds.

A QROPS - Qualifying Recognised Overseas Pension Scheme - is a special pension arrangement that allows expats or international workers with UK pension rights to transfer their UK pension funds overseas if they move permanently out=side the UK.

HMRC has already acted to halt perceived abuses -

• Singapore providers were removed from the QROPS list in 2007
• Tax officials in the Channel Islands had to make changes to trust legislation to stop UK pension transfers in to a QROPS. The trust then collapsed and clients withdrew the pension cash without tax before they were allowed to draw benefits under the plan rules.
• Prospective Gibraltar QROPS providers are embroiled in a continuing row over tax on pension benefits and have frozen transfers in from UK pensions.

Industry rumours claim HMRC is drowning in a flood of inquiries from providers who claim that QROPS legislation is poorly written and ambiguous, leaving them and advisors open to possible penalties despite trying to give best advice.

These rumours highlight the importance of arranging any overseas pension transfer through a regulated, independent expert, like QROPS Advisor. The importance of regulations means anyone who has taken advice by a regulated advisor usually has an independent watchdog to protect his or her investments.