us3andthedog

Hey

Well after a lot of research I think i'm more confused!!!

We arrived in Alberta May 2011 and transferred our UK pensions to Canada through the QROPS scheme a few months later.

We have been looking at buying a new house (through a reputable builder)and seeing as the UK house is still being rented till March next year was thinking about borrowing $30k from between the 2 of us via our RRSP (transfer pensions) for the deposit.

I was worried about the HMRC tax implications of doing this as we are still in the 5 year reporting period.

Can anyone shed any light on this.

Thanks in advance.

Mrs Us3

The4BellsLondon

I was under impression that you can't touch gor 5 years without a hefty penalty .,, am sure the experts will be along at some point !

Ben W Bell

You can't touch a QROPS transfer without very hefty taxation penalties. I think it's been extended to 10 years now as well, but I'm not certain.

mjwalker007

Under QROPS rules, if you make a withdrawal from a pension that has been transferred from the UK, The RRSP provider in Canada has a duty to report that withdrawal to the HMRC.The reporting requirement for QROPS providers as from April 2012 is now 10 years from the date of the transfer.

If you have not been left the U.K for five full tax years, The HMRC will class this an an unauthorized payment and you will have a member payment charge of up to 55% levied by the HMRC.

As ALL withdrawals have to be reported, just because in Canada you can access RRSP monies without tax liability if you are a first time homebuyer..............The U.K will still view this withdrawal as an unauthorized payment and will levy the appropriate member payment charge.

bats

Better not be 10 years I could be dead by then. I thought you can withdraw money after 5 years if it is your pension? Ie what you are going to live on.

us3andthedog

Mark, just be 100%, even if the funds are taken and repaid within the 15 year timeframe for the HBP, HMRC will still see this a payment and not a loan

mjwalker007

Yes.....because you are withdrawing funds, something that if the pension was in the UK, under UK rules, you would not be able to do. Unfortunately this is where some clients have been given bad advice by their banks/advisors etc, as they are only looking at tax penalties from the Canadian perspective, as opposed to the actual rules of a QROPS transfer and the consequences of making an unauthorized withdrawal in the eyes of the HMRC.

I think there are a few people on this forum who received letters from a well known organisation who transferred their pensions to canada, saying they had given them incorrect advice an potentially they could be liable for the 55% tax charge from the U.K

mjwalker007

There is a difference between the reporting timeline of 10 years from the date of the transfer and the tax consequences of withdrawing from a UK transferred pension, if you have not been left the UK for 5 full tax years or more.

With QROPS you have to bear in mind that the UK does not want people abusing the system and doing something with their pension that they could not normally have done if they were still in the UK. Therefore if you are of retirement age you could draw an income just like you would of been able to if it was in the U.K........if you have been left the UK for 5 years or not.

The 5 year rule is simply to stop people taking out large lump sums from their pensions or fully cashing them in......again, something you would not of been able to do if it was in the U.K which is why they levy the member payment charge of 55% to discourage people from doing this.

ann m

For the sake of a 55% levy tax, I would think - if you able - it would be much cheaper to just borrow the extra $30k on your mortgage?