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
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
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
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
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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