HMRC To Close Hong Kong QROPS Loophole

New regulations issued by the Treasury have been designed to close a loophole in the law that allowed individuals to avoid paying tax using Hong Kong registered QROPS overseas pensions.

London, UK (Pryce Warner International) May 17th, 2011 – QROPS are overseas pensions designed for Expats planning on retiring abroad. They hold a range of benefits over traditional pensions including preferential tax rates and no limit on deposits.

Despite the long established legitimacy of the scheme there are potential ways for individuals to take advantage of it, as has been the case with some Expats registered in Hong Kong.

David Gauke, Exchequer secretary to the Treasury explained the measures will form part of the new Finance Bill but will take immediate effect.

The measures relate to a new double-taxation agreement with Hong Kong that now mean U.K. residents with a Hong Kong registered QROPS can no longer claim income at the 15% top rate of tax with additional tax-free lump sum payments.

The government claims that the new measures are designed to form a clear strategy on preventing tax fraud and that anyone in violation of the guidelines will have action taken out against them.

The new clause will allow U.K. income tax to be levied on payments from a QROPS where: the payment arises in another country, is received by a resident of the U.K., the pension savings in respect of which the pension or other similar remuneration is paid have been transferred to a pension scheme in the other territory and the main purpose was to take advantage of the double-taxation arrangement.

Those that have prompted the change in law form a small contingent of people who aim to take advantage of the benefits of QROPS without any plans to leave the U.K.

The complex nature of transferring pensions and other assets overseas has meant that in the past many people have tried to take advantage of tax loopholes in the hope that the HMRC would not notice.

Anyone legitimately considering retiring abroad and seeking a QROPS will not be affected. The change in law is designed purely to prevent people taking advantage of a system that enables retirees to make the most of their life savings.

David Harra, a Senior Market & Investment Analyst with Pryce Warner International stated: “Any change in law and closing of loopholes of this kind is good for QROPS as a whole. There can be an unfair perception that overseas pensions are somehow illegal, largely due to the efforts of individuals that these guidelines aim to punish. It is important to remember that anyone planning on genuinely retiring in Hong Kong and seeking a QROPS will be perfectly within their legal rights to do so. Pryce Warner International Group have a very secure and stringent policy on ensuring that our clients are able to take advantage of QROPS overseas pensions while operating within the confines of HMRC regulations.”

Pryce Warner International Group provide International Asset & Investment Management, Independent Financial Advice & QROPS Overseas Pensions.

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By: Aneil Fatania
Financial Editor
Pryce Warner International Group
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