HM Revenue & Customs (HMRC) has announced that qualifying recognised overseas pension schemes (Qrops) transfers for individuals not in the European Economic Area (EAA) will be hit with a 25% tax charge.
This policy will hand the Treasury £60 million a year by 2021/22, the government said.
In documents released alongside the Budget today, HMRC said the tax treatment for Qrops transfers are broadly the same since 2006.
However the government is changing this in order to create ‘fairness in the tax system’, as these overseas pension transfers have already have tax relief in the UK.
For transfers requested on or after 9 March, transfers to Qrops will be subjected to a 25% tax charge unless certain conditions apply. This charge will be made before the transfer is made.
These conditions include if the individual and the Qrops are in the same country after the transfer, the Qrops is in a country in the EEA or if the Qrops is an occupational pension sponsored by the individual’s employer.
‘Payments out of funds transferred to a Qrops on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual is resident,’ HMRC added.
This policy will earn the government £65 million in 2017/18, £60 million in 2018/19, £65 million in 2020/21 and £65 million in 2021/22.
‘There are generally between 10,000 and 20,000 transfers to Qrops each year. It is expected that only a minority of these transfers will be subject to this policy,’ HMRC said.