Photoplex

I transferred my pension last year from a UK institution into a QROPS compliant product (RRSP) at Scotia Bank/Scotiatrust.

The issue is that all my other retirement funds (RRSP) are at a different institution. I would like to manage all my funds in one place.

If I transfer the Scotia RRSP to the other (non QROPS registered) institution, is this forbidden under the QROPS regulations? Or is the best thing to forget about it for another 9 years?

mjwalker007

If you move the funds to a different provider Scotia will have to notify the HMRC as per QROPS regulations and if the new provider is not QROPS qualified the HMRC could levy a tax penalty of up to 55% on the transfer.

This rule is in place to stop an abuse of the QROPS system..... i.e using a provider because they are specifically QROPS qualified , but in essence only using them as a steeping stone to transfer the funds to a provider of your choosing.

Photoplex

Much obliged for the swift and concise response MJ.

Will direct the Scotia funds into a long term dividend growth fund and forget about it for 9 years

Oakvillian

Why 9 years? The penalty only applies to funds moved within 5 years of leaving the UK. The reporting requirement lasts 10 years, but there is no financial impact after 5.

Photoplex

Interesting... so what benefit do they derive by having the reporting continue beyond the enforceable 5 year period?

And I assume that by "leaving the UK" you mean the funds, and not myself?

mjwalker007

Five full tax years of you becoming non resident......not from when the funds transferred over.

There is no definitive reason why they increased the reporting period to 10 years from the date of the transfer ( used to be five years previous to 2012 ) however you can speculate that HMRC want to monitor the activity on clients pension funds that originated from the UK to track any patterns emerging.............

Photoplex

Ahh, this old chestnut that I've wrestled with before. Non residency. I left the UK for Canada mid 2008 (so, almost 6 years ago). I understand the following is the official account:

In what circumstances would I become non-UK resident if I left the UK?

Normally if you leave the UK permanently or for 3 years or more or to work abroad full-time, you will become not resident and not ordinarily resident in the UK if your absence from the UK covers a complete tax year (i.e. 6 April to 5 April), and you spend less than 183 days in the UK during the tax year, and your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years. (For visits to the UK, days of arrival and departure are not normally counted as days spent in the UK.)

So, if all this criteria is met, is the non-residency retroactive (deemed to have begun on day 1 of leaving the UK), or the end of the 3 (or 4) years mentioned above?

If I'm reading this correctly... I'm already eligible to transfer the funds out of the QROPS RRSP to my other RRSP account. Is that correct?

JonboyE

Rules for tax are not always the same as rules for pensions.

Photoplex

The question I quoted from the HMRC was about the definition of "non-residency". As far as I can tell, there aren't two definitions at HMRC...?

JonboyE

http://www.hmrc.gov.uk/pensionscheme...eas-basics.htm

Tax on these payments will only be due if the member was UK resident at the time of the payment, earlier in the same tax year or in any of the five previous tax years.

Yandros

Just out of curiosity - how does the MMRC collect this 55% penalty.

If I'm no longer in the UK, and not receiving any income over there, and my pension funds have already been transferred into a QROPS compliant pension fund in Canada, then the money never gets to the UK.

Does the Canadian pension fund provider have to deduct the 55% and remit it to the HMRC (on pain of not being eligible for QROPS compliancy again) or is there some other system fro the HMRC getting their hands on it?

mjwalker007

The 55% tax charge would not be taken from the RRSP in Canada.......it is a separate issue entirely based on UK QROPS rules and levied by the UK.

This is from the HMRC website :


Reporting and paying the unauthorised payments charge

[Reg 3 & 4 The Registered Pension Schemes (Provision of Information) regulations 2006 (SI 2006/567)]

The scheme administrator should report the details of any payment of an unauthorised payment on the Event Report. The Event Report should be submitted to HMRC by 31 January following the end of the tax year in which the unauthorised payment is made. If the scheme has wound up, the Event Report should be submitted to HMRC by the earlier of
•the end of 3 months beginning with the date that the scheme completed winding up, or•31 January following the end of the tax year in which the unauthorised payment is made.

The person liable to the unauthorised payments charge should declare the payment on their Self Assessment return. Where someone does not receive a Self Assessment return they should report their chargeability to tax in respect of the payment to HMRC.