UK Pensions Tax Decision Criticized
Monday, March 13, 2017
A proposed new 25 percent tax charge on moving funds overseas from a UK registered pension scheme should have additional exemptions for people who are genuinely moving overseas, says the Chartered Institute of Taxation (CIOT).
The Chancellor announced in the Spring Budget that transfers of UK tax-relieved pension funds to overseas pension schemes will be subject to the charge on transfer with immediate effect unless at the point of transfer both the individual and the pension savings are in the same country, both are within the European Economic Area (EEA) or the Qualifying Recognised Overseas Pension Scheme (QROPS) is provided by the individual's employer.
The move is aimed at dissuading individuals from transferring their pension savings from UK schemes to overseas schemes that are aimed at letting savers have early access to their money tax-free.
But Colin Ben-Nathan, Chair of the CIOT's Employment Taxes Sub-committee, said that in many cases there will be genuine reasons for wanting to move pension funds outside of the UK, including emigration and full-time working abroad.
"What is needed therefore is some flexibility to permit tax-free transfers in appropriate cases," he said.
Ben-Nathan said he welcomed a number of exemptions to the tax charge, such as instances where the QROPS and individual are in the same country post transfer, both are in the European Economic Area (EEA), or the pension scheme is provided by the individual's employer.
"These exceptions are welcome but the CIOT is concerned that they are not wide enough," he said "While there may be relatively small numbers of people unfairly affected, the impact on each such individual could be very significant."