HM Revenue & Customs (“HMRC”) yesterday announced that a new overseas transfer charge of 25% will be implemented and will be effective for transfers requested on or after 9^th March 2017 for transfers from a UK registered pension scheme to a Qualifying Recognised Overseas Pension Scheme (“QROPS”).

There will be a few exclusions from this charge in certain circumstances, as follows:

• If an individual transfers to a QROPS in the country in which they are resident (for example a South African resident could transfer to an SA QROPS);
• If both the individual and the QROPS are in a country in the EEA (for example a Spanish resident client could transfer to a Gibraltar QROPS);
• If an individual transfers to a QROPS which is an occupational pension scheme sponsored by their employer;
• If an individual transfers to an overseas public service pension scheme and is employed by one of the employer’s participating in the scheme;
• If an individual transfers to a QROPS established by an international organisation and the individual is employed by that international organisation.

This would seemingly mean that for all overseas transfers where an individual is resident in a non-EEA country, for example an individual who is resident in South Africa, Singapore, Hong Kong, Thailand, Malaysia etc. and is looking to transfer to a QROPS in Gibraltar, a request to transfer made after 9^th March 2017 would be subject to a 25% overseas tax charge.

For anyone who has already made a request to transfer from a UK registered pension scheme to a QROPS, assuming that the UK scheme administrator has received a “substantive request to transfer” before the 9^th March 2017, the 25% overseas transfer charge should not apply.

Any requests that are received by a UK scheme administrator on or after the 9^th March 2017, or where the request has been received prior to the 9^th March 2017 but is considered a casual enquiry and not a substantive request to transfer, this would also seemingly be subject to the 25% overseas transfer charge.

In circumstances where the overseas transfer charge is applicable, the 25% tax charge will be deducted by the UK pension scheme administrator before the transfer is made.

Further to the above, there are some further rules around the aforementioned exclusions which could mean that an individual would become subject to the overseas transfer charge post transfer if their relevant circumstances change and it is considered to be within the “relevant period” and also for the potential return of tax paid under the overseas transfer charge if their relevant circumstances change and it is considered to be within the “relevant period”. The relevant period is 5 complete and consecutive UK tax years of the date the transfer takes place.

Therefore, for transfer requests after 9^th March 2017 some individuals who are excluded from the overseas transfer charge at the time of their transfer from a UK registered pension scheme to a QROPS, may become subject to the 25% tax charge at a later date, for example should they move from a country within the EEA (assuming their QROPS was also within a country within the EEA) to another which is not within the EEA.

Similarly, for someone who is subject to the 25% overseas transfer charge, they may actually be entitled to reclaim this amount at a later date should their circumstances change so that the overseas transfer charges are no longer applicable, for example should they move to a country within the EEA (if their QROPS was also within a country within the EEA), or should they become resident in the country in which their QROPS is based.

For those individuals who have already transferred their UK pension benefits to a QROPS before 9^th March 2017, they will not be subject to the overseas transfer charge, including if they subsequently transfer from their existing QROPS (or former QROPS) into another QROPS (or former QROPS) at a later date.

What are we doing?

In light of this announcement, Concept Trustees (Gibraltar) Limited will be making arrangements to contact all relevant UK registered pension scheme administrators in the coming days on behalf of prospective members to determine whether a substantive request to transfer has been received before the 9^th March 2017.

For those prospective members where it becomes apparent that a substantive request to transfer has been received prior to 9^th March 2017, it is expected that the transfer should be able to proceed and will not be subject to the 25% overseas transfer charge.

We appreciate that during this period there will undoubtedly be a degree of uncertainty for some prospective members until such time as we can ascertain from the various UK pension scheme administrators whether they have received a substantive request to transfer, however please rest assured that we will endeavour to resolve these uncertainties as swiftly and efficiently as possible, before being able to revert to business partners, intermediaries and prospective clients to determine the most appropriate course of action.

Regular updates and communication will be maintained with all affected business partners, intermediaries and prospective clients to ensure that everyone understands the position, as it becomes known to us.

We would be grateful for your patience during what will be an extremely busy time for us.

Should you have any general questions around the revised rules on transfers to QROPS and particularly the overseas transfer charge, please do not hesitate to contact Sean Gillease, Sales & Marketing Manager on +44 (0) 1481 740599.