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QROPS transfer tax revenues disappoint HMRC
| Published: | 15 Oct at 6 PM |
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UK expat pensioners might well be overjoyed to hear the controversial QROPs overseas transfer tax has been a bitter disappointment for the UK taxman.
Her Majesty’s Revenue and Customs was expecting a welcome windfall when it introduced the unpopular transfer tax, paid by expat retirement savers on the transfer of their offshore pensions. The British taxman projected an influx of cash at around £65 million, but only 30 eligible transfers took place during the 2017/2018 tax year, netting the taxman a paltry £1.4 million in total.
A lack of understanding of the finer points of the new rule plus a fear of being hit with excessive charges have caused a 52 per cent drop in this year’s total number of QROPs transfers when compared with the previous tax year. The numbers of those transferring their pension pots during the 2017/2018 tax year fell from 9,700 in the previous tax year to just 4,700. QROPs came in during April 2006, peaking in popularity during the 2015/2016 tax year with some 20,000 transfers worth £1.76 billion taking place.
Professionals in the sector believe the number of transfers liable for the tax is relatively small, as the charges apply to UK retirement savers living outside the European Economic Area (EEA) who transfer their funds to a QROPs based in a third country. Brexit is being seen as another reason for the reduced uptake of QROPs as transfers might be blocked or tax breaks may no longer apply to the product.
As with a good number of other potential Brexit problems, the government would seem to be confused about the future of QROPs, with the only comment to date stating the tax status of the product will depend on the Brexit deal.
Her Majesty’s Revenue and Customs was expecting a welcome windfall when it introduced the unpopular transfer tax, paid by expat retirement savers on the transfer of their offshore pensions. The British taxman projected an influx of cash at around £65 million, but only 30 eligible transfers took place during the 2017/2018 tax year, netting the taxman a paltry £1.4 million in total.
A lack of understanding of the finer points of the new rule plus a fear of being hit with excessive charges have caused a 52 per cent drop in this year’s total number of QROPs transfers when compared with the previous tax year. The numbers of those transferring their pension pots during the 2017/2018 tax year fell from 9,700 in the previous tax year to just 4,700. QROPs came in during April 2006, peaking in popularity during the 2015/2016 tax year with some 20,000 transfers worth £1.76 billion taking place.
Professionals in the sector believe the number of transfers liable for the tax is relatively small, as the charges apply to UK retirement savers living outside the European Economic Area (EEA) who transfer their funds to a QROPs based in a third country. Brexit is being seen as another reason for the reduced uptake of QROPs as transfers might be blocked or tax breaks may no longer apply to the product.
As with a good number of other potential Brexit problems, the government would seem to be confused about the future of QROPs, with the only comment to date stating the tax status of the product will depend on the Brexit deal.
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