QROPS ADVICE & QNUPS ADVICE

Qualifying Non-UK Pension Schemes - QNUPS
QNUPS were introduced on the 15th February 2010 and came about through amendments detailed in Statutory Instrument 2010/51 relating to the UK Inheritance Tax Act regulations. Before changes were made to the pension tax rules in 2006, protection from UK Inheritance Tax (IHT) applied to certain non-UK pension schemes. When the changes were introduced this exemption was unintentionally omitted which resulted in certain overseas pension schemes losing their IHT exemption. With these amendments both QNUPS & Qualifying Recognised Overseas Pension Schemes (QROPS) now enjoy exemption from
IHT.
The Plan is a tax efficient wrapper for pension assets, all funds within the Plan are free from IHT, there are no tax charges on death and the fund will enjoy tax free roll up. Contributions will be made by the member from taxed income or from personal capital, there is no tax relief on payments into the Plan. Contributions can either be single or regular (subject to minimum limits). There are no limits on the amount that can be contributed to the Plan but any transfers into the Plan must be justifiable in line with the client's overall wealth position. QNUPS are not a deathbed planning tool.
Investment choice within the Plan has very few restrictions. Permissible investments include; equities, bonds, gilts, insurance products, bullion, private & public listed company shares, commercial property and previously excluded investments known as Taxable Property; Taxable Property covers investments such as residential property, antiques, fine wine and collectables. Whilst there are virtually no restrictions on allowable investments it is important to remember that the scheme is a pension plan and a low risk strategy must be pursued.
It is possible for the member to borrow up to 25% of the Plan funds, this must be arranged at a commercial rate of interest (which will be paid to the the Plan) and must be repaid before drawdown can commence. It is also a requirement that security must be held against the loan.
Income will be paid gross from Guernsey and subject to the client's marginal rate of tax in their country of residence. It is important that each client receives tax advice in their country of residence to ascertain the tax position there. A lump sum of up to 25% of the fund can be paid to the member (tax free for UK resident members, clients in other jurisdictions will need to seek advice).
Standard retirement benefits and termination events as follows:
■ Normal Retirement Age of 65;
■ Early Retirement Age of 55;
■ Death & Permanent Disability;
However there may be greater flexibility, determined by an individual's circumstances, which will need to be considered on a case by case basis. The member must start to draw an income by the age of 75.
■ A cash lump sum benefit up to 25% of the Plan value, tax free when paid into the UK;
■ A number of flexible benefit income options to be agreed with the client such as fixed term payments and variable income options.
Upon death of the member, all remaining funds within the scheme will be free of IHT. The funds can then be used to pay a dependants pension, be held in trust for future beneficiaries or be paid as a lump sum. Again, it is vital that the member seeks appropriate taxation advice relevant to both themselves and their potential beneficiaries before registering their wishes for disbursement with the trustee. The trustee retains ultimate discretion on any distribution but the member's wishes will be carefully considered before any decision is made.
The Plan is a pension plan that will appeal to high net worth UK residents seeking an alternative to a traditional pension.
Potential clients may have maximised their UK registered pensions and are looking for alternative options or they may be restricted with the new anti-forestalling rules in the UK and are looking for greater flexibility in their retirement plan. It also provides clients with the peace of mind that all funds can be passed upon death to the member's beneficiaries free from IHT and any withholding taxes in Guernsey.
The Plan will also appeal to UK expats with a QROPS that have been non-UK resident for a minimum of 5 complete tax years and are considering returning to the UK, as a QNUPS will prevent their pension funds once again falling under the UK pension regime.
A number of expats may also still be UK domiciled with a potential liability to UK Inheritance Tax. A transfer of assets to the Plan will provide total protection against this potential liability.
In summary the plan offers the following benefits:
■ No UK Inheritance Tax liability;
■ Up to 25% tax free lump sum at pension commencement;
■ No requirement to purchase an annuity;
■ Tax efficiency: no tax on the pension assets within the Plan; pension income paid gross.
■ All remaining funds within the Plan, following death, can be distributed to chosen beneficiaries;
to make contributions with no lifetime limit;
■ Increased flexibility when taking pension income on retirement;
■ Ability to continue making contributions once drawdown has commenced;
■ Up to 25% of the Plan value can be loaned to the member;
■ Choice of investment management;
■ Wide choice of investments, including residential property;
■ Open to all nationalities;
■ No trustee reporting requirement to HMRC;

Contact Derry Thornalley on 0044 1664 444625

Marlborough Pensions launches the Shearwater QNUPS, which will be known as the Shearwater Evolution Plan.
You may have come across yet another acronym in the pensions world – QNUPS, Qualifying Non-UK Pension Schemes. QNUPS were born on the 15th February this year and came about through amendments to the Inheritance Tax Regulations; before changes were made to the pension tax rules in 2006, protection from IHT applied to certain non-UK pension schemes. When the changes were introduced this exemption was unintentionally omitted which resulted in certain overseas pension schemes loosing their IHT exemption. With these amendments both QROPS & QNUPS now enjoy exemption from UK IHT.
So, what's a QNUPS and how does it differ from a QROPS? Well the simple answer is not a lot; a QROPS is by definition a QNUPS and so is a ROPS (Recognised Overseas Pension Scheme) but a QNUPS is not necessarily a QROPS! Confused yet?
As with all products born out of the new pensions regime the devil is in the detail. A QNUPS has the same requirements as a QROPS to meet the primary taxation conditions but the beauty lies in the lack of an 'R' which means that there is no reporting requirement to HMRC, this provides even greater flexibility in investment choices and will even permit investment in residential property!
If your client was ever going to return to the UK it may be in their best interests to transfer into a QNUPS, this will allow them to continue receiving the benefits they have become accustomed to, including unrestricted investment choices but most importantly they would not be subject to the horrific UK pension taxes on death. All income would continue to be paid gross from Guernsey and subject to taxation at the client's marginal rate back in the UK.
At the present time it is not possible to transfer your UK pension directly to a QNUPS; currently the only way to get your pension out of the UK is by transferring to a QROPS and then, once outside of the UK for 5 years, arrange for an onward transfer to the QNUPS. Here at Marlborough we are perfectly positioned to assist with both elements.

The screws are tightening on the bank accounts of high net worth individuals, particularly those in the City. With effect from April, anyone earning more than £100,000 will see their personal tax allowances reduced, and those with an income of more than £150,000 will be taxed at a top rate of 50 per cent. Individual bonuses to bank workers of more than £25,000 paid before April, meanwhile, are subject to a 50 per cent levy paid by the bank; the employees also pay income tax on the money they receive.

So, who's leaving?

There's been talk of an exodus of high net worth individuals since the Chancellor first outlined his tax hike plans in last April's Budget. David Anderson of London law firm Sykes Anderson thinks the new regime "may be the last straw for high net worth individuals who have already been directly targeted by the changes to non-domicile taxation and the abolition of taper relief for capital gains tax (CGT) purposes."

However, Paddy Dring, head of the international residential department at property consultant Knight Frank, believes that only a relatively small number have actually left the country so far. "Others are making preparations but are waiting to see what happens over the coming year," he says.

"There are without doubt some who will leave London, but many are realising they have underestimated the complexities of going," adds Jonathan Hewlett, head of Savills' London office. "More and more, we are hearing about people who've looked at moving but can't find the right place to go - a place where their partner will be happy and there are good school choices. The young are more transient, however, and there is a perception that they will go wherever the good deals are."

Tax issues

Those complexities extend well beyond school choice. Paul Garwood, head of personal financial planning at London accountant Smith & Williamson, points out that HM Revenue & Customs (HMRC) has not been making it any easier to escape the UK tax system recently.

The test for residency (which governs the requirement to pay UK tax) used to be that if you were in the UK for more than 183 days in a tax year, or more than 90 days a year over a four-year period, then you were UK resident. But as Mr Garwood explains: "Now, if you haven't qualified for resident status in another country and you keep your UK home, they may just count you as UK resident anyway if you return at all, so you really need to plan carefully and burn your UK boats if you're serious about it."

That may well mean selling your home, rather than renting it out. It also means ensuring you spend enough time in your new jurisdiction to qualify as tax resident there. You can no longer work in Paris during the week but nip home to see your family in Britain at the weekends if you want to escape the UK tax regime.

The tougher regime is a particular problem for people trying to move directly to a tax haven such as Monaco, says Mr Anderson. "First, it is harder to prove you've left the UK for good, as the Revenue is far less likely to accept you are moving your life away from the UK," he explains. "Secondly, Monaco has no double tax treaty in place with the UK, so you could find you're a dual resident for tax purposes, and therefore remain liable for UK income tax. (Double tax treaties contain a test to establish your residency for tax purposes in either one country or the other; dual residency is not possible.)

"It can be much simpler therefore to move to a country which has a more favourable regime than the UK but also has a double tax treaty with the UK, such as France," Mr Anderson suggests.

Pension planning

Apart from tax residency itself, you need to plan other tax-related aspects of your finances. Pensions are one key consideration. If you are in your employer's pension scheme, you will be able to remain in the scheme when you're working abroad for a maximum period of ten years; after that you may be able to negotiate a move into a local equivalent scheme.

If you are moving overseas indefinitely, you could consider transfer your UK pension into a Qualified Recognised Overseas Pension Scheme (QROPS) - an overseas pension scheme approved by HMRC. The advantage is that they are governed by the local tax rules, and these tend to be more flexible than the UK system. For example, you may not have to buy an annuity with the bulk of your fund; there may be less or no tax to pay on pension payments; or it may be possible to take the whole lot as a lump sum.

by:Faith Glasgow
http://www.investorschronicle.co.uk/InvestmentGuides/FinancialPlanning/article/20100208/b01de62e-125c-11df-bbca-0015171400aa/Time-to-move.jsp

QROPS are very much in the news at the moment. Recent newspaper articles have screamed at readers “Take your money and run” (The Telegraph) and “Get your money out of Britain” (Sunday Times). Much to the annoyanceof HMRC, it seems people
are doing just that. Recently released figures showed there was a 154% increase
in transfers to QROPS in the 2007/08 tax year compared to the year before, while
uptake of new QROPS was said to have doubled in the last three months of 2009.
HMRC, which has already penalised pension rules abusers and closed down Singapore as a QROPS jurisdiction for misrepresentation, will not be amused by the headlines or
pleased by the growth of a market that diverts revenue from government coffers.
Regardless, for the right person in the right place QROPS are highly attractive. Since April 2006 it has been possible, providing you have been non-resident for five years, to:
■ receive your pension free of tax (dependent on where you transfer it to);
■ avoid purchasing annuities;
■ avoid an Alternatively Secured Pension at 75, resulting in losing 82% of fund in taxes on death;
■ unlimited fund size;
■ pass on to your beneficiaries the balance tax-free.
But to continue to enjoy such benefits, more respect needs to be given to HMRC – quite simply, do not abuse the rules and do not delay making a transfer. Pension legislation changes like the breeze, and all the current inflammatory press attention
could bring an ill wind sooner than you think.