Out-Law News 2 min. read
25 Jun 2013, 5:21 pm
According to press reports, HMRC has withdrawn its 2011/12 tax assessments against UK pension scheme holders who had transferred their pensions to a Recognised Overseas Self-Invested International Pensions (ROSIIP) scheme based in Singapore. This scheme had previously been included on HMRC's list of QROPS, but was removed from the list in May 2008.
International Adviser reported that HMRC has applied to withdraw its case against the 122 ROSIIP investors made part of a Group Litigation Order (GLO) by the High Court last year. However the judge, Mr Justice Charles, has ordered the department to publish a statement setting out its exact position on QROPS within 21 days before he will allow it to drop the case. If HMRC does not do so, he will make a judgment that would be made public, he said.
Pensions law expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that the judge had "slapped HMRC very heavily on the wrists".
"If HMRC is to publish a list, that list can be expected to provide information that others can rely on," he said. "If pensions administrators can see that a scheme is listed, they should not have to pay penal tax if HMRC shouldn't have included that scheme on its list."
"HMRC's aggressive approach has cast a poor light on its operations, and it will now have to pay all the legal costs incurred in this sorry tale," he said.
A QROPS is a foreign pension scheme that HMRC recognises as being capable of accepting a transfer value from a UK-registered pension scheme. Scheme members can transfer their UK pension benefits to a QROPS without incurring unauthorised payment charges or sanctions and, once transferred, escape UK tax liability on pension income.
In order to be accepted as a QROPS a scheme must be recognised for tax purposes by the local jurisdiction, be open to membership by locals and be located in a jurisdiction that operates tax information-sharing arrangements with the UK. Schemes self-certify to HMRC that they meet these requirements, and are included on a list of such schemes that is updated by HMRC twice a month.
The ROSIIP at the centre of the dispute was included on HMRC's list of QROPS in 2006, after it had informed HMRC that it met the criteria. It was removed from the list in May 2008 after HMRC discovered problems with the scheme. A 2011 High Court judgment, which was later upheld by the Court of Appeal, found that the scheme had never been a QROPS. HMRC then issued tax assessments against investors who had transferred their UK pension savings into the scheme.
According to a statement on HMRC's website, the affected scheme members had applied for a judicial review of these assessments based on what they claimed was a "legitimate expectation that transfers to ROSIIP would not attract tax liabilities as it appeared on the published list on the HMRC website and related correspondence".
The current preamble to HMRC's list of QROPS states that inclusion of a scheme on the list "should not be seen as confirmation by HMRC that it has verified all of the information supplied by the scheme in its notification". Transfers to schemes that have been included on the list but that do not or no longer meet the criteria "could mean that the member has to pay an unauthorised payment charge", according to the document.
"Where the scheme administrator has relied on the fact that the overseas pension scheme is included on the latest published list (and can demonstrate if required that it checked the list no more than one day before the transfer was made) and did so in good faith, this should normally provide just and reasonable grounds for HMRC to discharge any liability of the scheme administrator to the scheme sanction charge," the document said.
"This should also normally provide just and reasonable grounds for HMRC to discharge any liability of the member to the unauthorised payments surcharge. However, as mentioned above there may still be an unauthorised payment charge liability for the member in these circumstances," it said.