HMRC Confirms 70% Tax Bill For QROPS Invested In Residential Property

Qualifying Recognised Overseas Pension Schemes (QROPS) that have invested in residential property face a tax bill of up to 70% after HMRC issued fresh guidance on scheme rules.

Providers are seeking clarification from the revenue but it is thought the amended regulations will be applied retrospectively, potentially affecting hundreds of expat pensioners.

This will lead to a “taxable property unauthorised payment charge” on schemes with residential property as an underlying asset.

While it is believed most large providers have stayed away from residential property, owing to the fact it is not allowed with UK pensions, several QROPS schemes are known to promote it as a permissible asset.

Roger Berry, managing director of Guernsey QROPS provider Concept Group and chairman of the island’s QROPS committee, said: “This shows for the umpteenth time that the straightforward benefits of QROPS are plentiful and as soon as you stray into other areas, irrespective of how convincing the plan sounds or even if it has a QC sign off, you are taking enormous risks.  It’s just one of a number of areas we have stayed well away from.”

Gary Boal, managing director of Isle of Man-based Boal & Co, which runs QROPS schemes in Guernsey and Isle of Man, said he was aware of numerous schemes that had allowed residential property, but added: “We’ve always known you could not do this.”

Berry said he was also awaiting clarification over a second area of revised guidance from HMRC that suggested changes to the reporting requirements on QROPS, though he said this would not impact on the taxes they paid.

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