HRMC publishes clarification rules for repayment of QROPs transfer tax

Published:  10 May at 6 PM
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A new law introduced last month makes the QROPS transfer charge paid in error far easier to reclaim.

Although it’s always been possible for UK expats to reclaim the unpopular, some say unfair, tax, the former process was confusing and slow, necessitating the new procedure in order to clarify the requirements in a formal, more easily understood manner. According to HMRC, the change will enable those entitled to a refund to make a correct claim at the right time as well as giving pension scheme managers and administrators a straightforward process. At the same time, the new law will prevent investors from exploiting loopholes in tax law when making pension fund transfers overseas in order to avoid paying UK taxes.

Scheme members will now be able to reclaim the pension transfer tax should the circumstances of the beneficiary change. One example given was when a person transferring a pension fund to a QROPS becomes tax resident in the country in which the QROPs is based. Other exemptions include transfers by employees of organisations sponsoring QROPs-qualifying occupational pensions as well as transfers to schemes based in an individual’s country of residence. The new regulation also states all claims for repayment of the pensions transfer tax must be submitted on the correct form issued by HMRC.

Along with notification of the new law, the British tax office also published a memo giving exact details of the new requirements, thus making it easier for individuals as well as financial professionals to claim under specific circumstances. In addition, full details of how to make a claim after payment was made in error are also set out, as well as noting the charge isn’t applied to European Economic Area countries, meaning savers may transfer to an EEA-based QROPs without paying the charge, provided they’re resident within the EU bloc.

The clarification of the already existing law should make it far easier for expat retirees to reclaim the charge should they later relocate to the country where their QROPs is registered, as well as clarifying the situation for would-be expatriates looking to avoid the charge entirely by choosing a destination country which offers a suitable QROPs.
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