Friday, April 8, 2011
The UK has extended its crackdown on overseas tax avoidance with the closure of what the Treasury has labelled an unintended loophole for UK residents transferring pension savings overseas.
New legislation, to have effect from April 6 and to be included in Finance (No.3) Bill, is to target Qualified Registered Overseas Pensions (QROPS), and, in the opinion of the Treasury, it will prevent individuals from taking advantage of a tax loophole that would have emerged on April 6, had the government not taken action on the matter.
HM Revenue and Customs (HMRC) has provided further details on the operation of the new measure. HMRC states that the government's intention is to prevent tax avoidance through the interaction of relief for pension savings and the provisions of certain double tax arrangements.
According to HMRC, the legislation will provide that, notwithstanding the terms of a double taxation arrangement with another territory, a payment of a pension or other similar remuneration may be taxed in the United Kingdom where:
In the event that tax is paid in the other jurisdiction, appropriate credit will be available against the UK tax chargeable.
Making the announcement was Exchequer Secretary to the Treasury, David Gauke. He said: "The government has set out a clear strategy on preventing tax avoidance. We will not hesitate to take action to stop those who seek to take unfair advantage of unintended tax loopholes", adding that: "The measure demonstrates our commitment to act quickly to close these".