After HMRC's announcement on 6 December 2011 of its intention to make amendments to the current legislative regime governing qualifying recognised overseas pension schemes (QROPS), a period of consultation followed.

It seems that the proposed amendments were in fact a 'fait accompli' long before the consultation period ended because, despite many representations made by various bodies, the amendments took effect from 6 April 2012 with only minor changes.

In response to the changes that came into effect on 6 April 2012, Guernsey, by way of the Income Tax (Pension Amendments) (Guernsey) Ordinance, 2012 created a new form of pension scheme, known as a 'Section 157E scheme'.

The key features of a Section 157E scheme are no Guernsey tax relief on contributions, no Guernsey tax charge on benefits received regardless of the resident status of the member, and benefits may be payable from age 55 with no upper age limit on benefit payments. It seemed that a Section 157E scheme would meet all the requirements of the new QROPS regime (which require local and non-local members of a QROPS to receive the same tax treatment on receipt of benefits in the jurisdiction in which the QROPS is established).

It is understood that many Guernsey-based QROPS providers converted existing schemes from Section 157A schemes to Section 157E schemes with a view to ensuring that from 6 April 2012 such schemes remained "recognised overseas pension schemes".

However, on 12 April 2012 HMRC delisted all Guernsey based QROPS, except three, from its published QROPS list. No other jurisdiction's QROPS were collectively delisted in this way. While the absence of a scheme on HMRC's published list of QROPS does not necessarily mean that a scheme is not a 'recognised overseas pension scheme', practically it is extremely difficult to operate a QROPS that does not appear on HMRC's published list.

On 9 May 2012 just 12 Guernsey-based QROPS appeared on HMRC's published list of QROPS. Such QROPS are those able to demonstrate that only Guernsey resident members may be admitted to membership.

HMRC is clearly extremely unhappy with the introduction of Section 157E schemes and has now introduced regulations, coming into force on 25 May 2012, specifically excluding Section 157E schemes that are able to admit non-resident Guernsey members from becoming recognised overseas pension schemes.

In light of this the current position appears to be that in order for a Guernsey-based pension scheme to qualify as a recognised overseas pension scheme the rules of such scheme must not permit the admittance of non-resident Guernsey members. Obviously, unless matters change, this means the end of Guernsey's QROPS industry as we know it.

The changes obviously impact on the ability of Guernsey to continue to undertake QROPS business but may also raise interesting questions going forwards in connection with existing non-resident members who have transferred UK tax relieved funds to Guernsey.

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