SMSF trustees that wish to continue as Qualifying Recognised Overseas Pension Scheme (‘QROPS’) will need to provide an undertaking to Her Majesty’s Revenue and Customs (‘HMRC’) that they are aware of certain changes to the UK tax rules that apply to QROPS transfers. These changes are discussed in detail below.
The undertaking using HMRC form APSS240 must be received by HMRC by 13 April 2017 or the SMSF will automatically cease to be a QROPS.
The form must be signed and posted to the specified address in the UK, so SMSF trustees must ensure they do not leave it too late for their physical form to reach the destination on time.
UK Spring Budget 2017
The most recent UK Spring Budget 2017 included an announcement that certain transfers from UK pension funds to a QROPS will become taxable with effect from 9 March 2017.
Prior to 9 March 2017, such pension transfers to a QROPS were broadly tax free (subject to the UK’s lifetime allowance regime).
The budget change imposes a 25% tax on pension transfers made to a QROPS on or after 9 March 2017 unless certain conditions are met. One of relevant conditions is that both the individual and the QROPS are in the same country after the transfer. If this condition is met, the 25% tax on pension transfers is not imposed on UK pension transfers to a QROPS fund. This relief should generally cover Australian QROPS SMSFs where the fund members are living in Australia.
To continue to be a QROPS, Australian SMSFs will need to provide an undertaking to HMRC using form APSS240 that they are aware of these changes. If HMRC has not received an undertaking from the fund trustee by 13 April 2017 using this form, the fund will automatically cease to be a QROPS. The form must be signed and posted to the specified address in the UK. The form cannot be submitted by other means, so timely action will be necessary to ensure that the form is received by HMRC within the deadline.
For more information, please visit https://www.gov.uk/government/publications/pension-schemes-overseas-scheme-manager-march-2017-undertaking-apss240
Any SMSF trustees that are currently in the process of submitting their documentation to HMRC to become a QROPS will need to ensure that they are using the most up-to-date version of HMRC’s notification form APSS251. This form changed on 8 March 2017 and only the latest version of the form contains the new undertaking.
The UK Spring Budget 2017 will also introduce a modification to the UK tax rules that apply to benefit payments from a QROPS fund that has received UK tax relief on a roll-over from a UK pension scheme made on or after 6 April 2017. As a result of this change, UK tax rules will apply to any payments made in the first 5 full UK tax years following the transfer, regardless of whether the individual is or has been UK resident in that period.
For further information, please see the following links:
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The above is general commentary and not advice that should be relied on. DBA Lawyers does not provide overseas tax advice and affected clients should obtain appropriate UK tax advice in relation to these measures.