Pension scheme members face tax clawback

MEMBERS OF AUTHORISED overseas pensions could face retrospective taxes of up to 85% if the taxman changes the status of the schemes, a wealth management expert has warned.

HM Revenue & Customs keeps a list of authorised Qualifying Registered Overseas Pension Schemes (Qrops), which allows taxpayers who move abroad to liquidate their UK pensions assets.

However, a recent ruling involving a Singapore-based scheme said that HMRC was within its rights to remove the scheme from its list and charge members retrospectively.

A spokesperson for HMRC told FT Adviser: “If a scheme has been included on the published list in circumstances where it should not have because it did not satisfy the conditions to be a recognised overseas pension scheme, any transfer that has been made to that scheme could potentially give rise to an unauthorised payments charge liability for the member.”

David Howell, chief executive at Guardian Wealth Management, warned the tax charge could be substantial: “I think there would now be a tax charge of up to 85% of the original investment. I have heard that there is a way of mitigating this charge, maybe by transferring to another scheme. We are looking at a way of mitigating this tax charge right now.”

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