HMRC’s Trouble with the QROPS List… Again

The Qualified Recognised Overseas Pension Scheme (QROPS) program has
been consistently increasing in popularity since its inception in 2004.
Introduced initially as a means of protecting British
expatriate pensioners from double taxation on the pensions that accompany
them overseas, the preferential tax rates offered by so many foreign
jurisdictions and flexible pension investment opportunities offered
by QROPS proved enormously attractive.
In 2011 there were around 21,000 people with QROPS. By next year it’s
estimated that 567,000 people will have overseas pension schemes- the
accompanying asset increase is something like 2700%. Near the beginning
of 2013, around £2.6 billion had QROP schemes while the current reporting
has that number shows upward of £6 billion. Market analysts predict
that in the near future the total figure may top £281 billion.
It’s an impressive climb, particularly if the pension scheme industry’s
rocky history is taken into account. On April 11, 2012 Guernsey was
the undisputed world champion pension investment jurisdiction. It swept
the financial industries awards for best place to invest one’s pension
and a third of all QROPS landed there. In late March 2012,
HMRC announced that changes had been made to the QROPS regime. On April
12, HMRC released a revised list of acceptable schemes. Of Guernsey’s
313 ‘recognised’ schemes, 310 had been delisted- more than 99% of
them. The Bailiwick of Guernsey’s QROPS industry was eviscerated and
effectively ended.
The blow was sufficiently heavy to rattle expat pensioner all over
the world. One day the world’s most popular pension investment jurisdiction
had a wider slice of the pie, the next day they were lucky to find crumbs.
If Revenue could summarily (and some said arbitrarily) strike hundreds
of ‘recognised’, popular Guernsey schemes from their list literally
overnight, many asked, could the same happen anywhere else?
To some widespread consternation the answer to that query is: yes.
Scores of nervous pensioners would soon discover that there was some
important small print on HMRC’s QROPS list. It read: “The list is
not to be taken as a recommendation for a particular scheme or product.
Nor should it be taken that any scheme featured on the list is approved
or backed by HMRC.” The recognition asserted by the ‘R’ in QROPS
was simply confirmation that the scheme in question appeared to have
taken the appropriate steps to make the list, not an endorsement.
There was a group of pensioners, however, who were not at all surprised-
those with schemes managed by the Singapore corporation Panthera’s
Recognised Overseas Self Invested International Pensions Retirement
Trust 
(ROSIIP). In a prelude to the Guernsey poleaxing, the ROSIIP scheme
was dropped by HMRC from the list in 2008. Their scheme deemed illegitimate,
the investors got worse news in 2011 when Revenue declared that ROSIIP
had never been a QROPS. The investors sued Revenue over the ruling and
lost. In 2012 the crown issue letters to the ROSIIP trustees informing
them of the 55% taxation penalties imposed upon the now-unsanctioned
fund transfer. As more letters were sent and more trustees threw their
hats into the ring it was revealed that HMRC had not to pursue investors in a nearly identical
scheme, “Beazley”.
Though Revenue lawyers denied a similarity, a senior HMRC lawyer had
unfortunately (for Revenue and Customs) gone on the record before the
tribunal began acknowledging that the two were indeed quite similar.
With this revelation HMRC not only gave up their pursuit of the ROSIIP
trustees, they were excoriated by the judge and ordered to issue an
apology and an accurate list. On the 5
July, 2013 they did so with the following statement: “As reported
earlier, the HMRC stated that it had published the incorrect list mainly
as a result of a manual error which came about during the careful examination
and comparison of the registered Qualifying Recognized Overseas Pension
Schemes (QROPS).”
So all of the list wrangling, inclusion and exclusion,
uncertainty and confusion is probably a bad thing, right
? you
ask. Actually… no, not really. The fact is- although a place on the
list still does not signify an endorsement by or the backing of HMRC,
most of those QROPS will remain in good standing. While the ROSIIP ruling
should come as something of a relief. It’s an indication, at least,
that investors who entered into a good faith partnership with a QROP
scheme is not without recourse should that scheme be delisted- and now
there’s precedent for any future suit.
Of course, picking a quality scheme that will compliment your investment
style and inclination from among that list isn’t necessarily some
mean feat. There are thousands of schemes in dozens of jurisdictions
all of which feature varying rates, client-loads, styles, reputations,
commitment, talent, ethical standards, etc. If you’re considering
a QROPS (and if you’re moving overseas with a pension, you should),
do a lot of research and be sure to consult a QROPS professional.

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