Tuesday, April 17, 2012
Guernsey Finance, the promotional agency for the island's financial services industry, has condemned the UK tax authority's decision to remove almost all Guernsey Qualifying Recognised Overseas Pensions Schemes (QROPS) from its updated list, describing the move as an 'unjust attack on the island'.
HM Revenue and Customs (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 has confirmed that following the change, the number of approved Guernsey schemes has fallen from more than 300 on April 5, 2012, to just three.
It was previously considered that in order to meet the new rules, any scheme wishing to be granted QROPS status after April 6, 2012, would have to offer equal treatment to both resident and non-resident taxpayers. However, it became apparent only days before the publication of the new list on April 12, 2012, that HMRC's intentions were otherwise, and that the UK instead sought to significantly restrict the provision of UK tax exemptions on pension transfers.
HMRC has now indicated that just schemes offered to 'residents only' would be considered qualifying schemes under the new criteria, meaning that QROPS will now have to be offered from the same territory as the UK taxpayer is newly-resident in.
The number of Guernsey schemes accepted onto forthcoming lists will increase as schemes clarify their offerings to HMRC, the government anticipates, but the industry will likely remain substantially below historic levels.
The decision, the Guernsey government has said, may spell a further 200 job losses for the island; a major blow compounded by the removal of Low Value Consignment Relief, for low-value exports, such as CDs and DVDs to the UK market, also from April 6, 2012.
Responding to the change following the publication of the updated list, Fiona Le Poidevin, the Deputy Chief Executive of Guernsey Finance, said:
“HMRC had given us an indication that only Guernsey pension schemes for Guernsey residents would remain on their list of QROPS. By implication this meant that they were going to delist Guernsey pension schemes for non-residents. This raised the question as to whether it was just Guernsey being targeted or whether it was going to impact other jurisdictions and in particular, those offering third-country QROPS. What we have determined from the publication of the new list is that, in broad terms, it is Guernsey which has been singled out by HMRC.”
“It is difficult to work out precisely why this is the case. HMRC’s amendments to its legislation contained in the UK Budget were clearly focused on targeting abuses in the system and Guernsey has always upheld itself as a model of compliance with the QROPS regulations. The other major change within the new regulations was that schemes must treat residents and non-residents alike in respect of tax treatment and Guernsey took quick and decisive steps to introduce a new category of pension scheme, known as s157E, which was designed to meet the revised criteria for a QROPS."
“Therefore, it is confusing and frustrating that HMRC has now delisted almost all Guernsey schemes while most of those from other jurisdictions remain listed as QROPS. We accept that HMRC has the right to make its own rules regarding the treatment of UK tax relieved schemes but it needs to be an open and fair process.”
“The current actions have been introduced without warning, lack transparency and appear discriminatory. Indeed, HMRC seems to have set aside its own rules to meet an unpublished policy objective."
“The whole situation is made even more puzzling by the fact that HMRC’s original consultation document [said] that the changes would have a ‘negligible impact on receipts’ to the UK exchequer."
“If this situation is not resolved then it could potentially have an impact on around 200 jobs in Guernsey but it must be emphasized that existing members are fully protected and existing schemes will need to continue to be serviced. In addition, Guernsey has always proved very adaptable in the past and so we would be hopeful that any job losses would be limited by the demand for skilled labour in traditional fiduciary businesses, the funds, insurance and banking sectors or other new and emerging areas of the finance industry.”
“Of course, it should not be forgotten that HMRC has not just delisted Guernsey pension schemes for non-residents but it has also delisted many which are for Guernsey residents only. I think that there is an element of confusion here due to the fact that most schemes with Guernsey residents only may not actually have that specified within the scheme any more than UK schemes would do so. No doubt this will be corrected in the very near future by HMRC but the fact that the Guernsey government scheme for public employees has been delisted serves as an illustration as to the extent to which this is an unjust attack on Guernsey."