Monday, August 20, 2012
The UK tax authority, HM Revenue and Customs (HMRC), has removed all Qualifying Recognised Overseas Pension Schemes based in Cyprus from its approved schemes list, effectively blocking the territory from being able to admit new pension transfers on a tax-free basis from would-be UK expatriates.
HMRC permits the transfer of a UK taxpayer's pension entitlements to another jurisdiction in which they are seeking permanent residence, free from tax. However, in recent months, HMRC has introduced more stringent rules concerning these QROPS, removing a number of structures from its list of recognised schemes.
HMRC on April 12 published an updated list of QROPS, removing those that it considered no longer complied with new rules in place from April 6, 2012. Guernsey, which says it was unjustly 'singled out', has confirmed that following the change, the number of approved Guernsey schemes fell from more than 300 on April 5, 2012, to just three in the updated list, despite the introduction of a new pension scheme and its historic prevention of lump sum payments. There are 18 Guernsey schemes in the most recent list.
Prior to the most recently updated list of August 10, 2012, Cyprus had retained five schemes on HMRC's QROPS list. Although HMRC's rationale is unclear, it has been suggested that Cypriot law falls foul of HMRC QROPS rules stipulating that tax relief must be offered on the same basis to residents and non-residents.