Speaking to International Adviser, she said: “I don’t think they [UK government] had much choice but to press ahead with the Qrops changes. There is an element of the horse has bolted, and trying to peddle back would be too messy, especially given the reacceptance process at HMRC is already in motion.
“Plus, and perhaps more importantly, the Government probably didn’t want a fire sale on Qrops, which you could see happening if they put the changes on hold.”
UK tax cull
This week, a number of key UK tax changes were put on hold and dropped from the Finance Bill, the legislation ratifying proposals announced in either the Autumn Statement or the Spring Budget.
This included delays to the long-awaited reforms to the way non-UK domiciles are taxed, cuts to the Money Purchase Annual Allowance (MPAA), the £1,500 Pension Advice Allowance (PAA) as well as proposed cuts to the tax free dividend allowance.
However, significant changes to the way foreign pensions are taxed survived in the Finance Bill, which needs to be approved by parliament before the snap election on 8 June.
The reforms include a 25% transfer charge on qualifying recognised overseas pension schemes (Qrops), announced in the Spring Budget on 8 March and which came into force immediately.
In December, HMRC said it would replace the 70/30 ‘income for life’ rule requiring Qrops outside the EU to earmark 70% of funds as income for retirement, with a new system where overseas pensions must be regulated in the country where they are established in.
‘Easy to implement’
Mike Morrison, head of platform technical at AJ Bell, believes these changes “are potentially easier to implement because the Qrops market stands on its own and has little impact elsewhere.”
“Changes to other parts of the market have wider implications and would need more time for discussion in parliament between parties on both sides,” he told IA.
He added that the UK government wants to press ahead with reforming the sector to tackle “a potential misuse of the rules and unsuitable outcomes for some people”.
James Badcock, partner at Collyer Bristow, said “any issues which have arisen from the Qrops changes have already been dealt with by HMRC so that’s why it was included in the Finance Bill.”
John Batty of Isle of Man-based Boal & Co explained that the Qrops changes “only affected people after the event” so people who had already moved their pension overseas prior to the dates weren’t affected.
“It was only new transfers that had to abide by the new rules meaning that nobody has had existing arrangements affected,” he said
‘No surprise’
Stewart Davies, group chief executive of Momentum Pensions, said it is “no surprise” that the Qrops reforms have been implemented when other measures have been dropped “given that the primary changes in the Budget 2017 revolved around the introduction of the [25%] overseas transfer charge, which was introduced immediately”
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