| The taxman is drawing up new rules to stop QROPS | | | | indirect investment in taxable property - for instance |
| pension holders from investing in homes, holiday homes | | | | buying a yacht that the scheme member sails triggers |
| and expensive art, antiques and wine for their own | | | | an unauthorised payment under the QROPS rules and |
| use. | | | | is a direct investment. However, if the QROPS owned |
| Taxable property--like residential property, timeshares | | | | shares in another investment vehicle that purchased |
| and investments in jewellery, classic cars and yachts | | | | the yacht for the QROPS, this would also become an |
| among other things--are frowned on by the taxman to | | | | unauthorised payment. |
| stop QROPS pension holders from benefiting from tax | | | | If you were planning to purchase taxable property |
| breaks on homes or belongings that they enjoy | | | | through a QROPS directly or indirectly, then best |
| themselves. | | | | advice would be to hold off the transaction until HMRC |
| New rules regarding taxable property for UK resident | | | | clears up what the new rules will be and when they |
| SIPP, SaSS and personal pension plan owners are | | | | are likely to apply from. |
| already in place, and the taxman has promised some | | | | If you already hold this sort of property in a Qualifying |
| special provisions are on the way covering | | | | Recognised Overseas Pension Scheme, then consult |
| - Investment regulated pension scheme's which are | | | | your independent financial advisor about whether to |
| non-UK resident, and hold interests in taxable property | | | | make a tax-effective disposal or sit tight with the |
| - these are QROPS (Qualifying Recognised Overseas | | | | investment. |
| Pension Schemes) or non-UK SIPP schemes. | | | | How the rules work |
| - Scheme members who use their offshore pension to | | | | The taxman's thinking behind the taxable property rules |
| buy taxable property | | | | in the UK is that pension scheme members should not |
| "These provisions will be set out in regulations to be | | | | be able to buy luxuries for their own use with cash |
| published in due course," said a HM revenue and | | | | that has attracted tax relief as a pension contribution. |
| Customs spokesman. "Until then, we cannot comment | | | | It follows that if HMRC feel cash from a former UK |
| on what they might be." | | | | pension fund that also attracted tax relief is used by a |
| No date is set for the introduction of the new rules. | | | | QROPS member to buy similar luxuries, then that |
| Calculating the tax penalty | | | | purchase should be subject to tax as if the money |
| The regulations for UK pension schemes make | | | | were in a UK scheme. |
| acquiring taxable property an unauthorised payment | | | | The problem comes from pinning down what part of a |
| that triggers a tax charge on the scheme member and | | | | QROPS fund derives from a UK pension transfer and |
| a sanction charge on the scheme administrator. | | | | what is a new contribution. In other unauthorised |
| These charges are taxed at 40% of the unauthorised | | | | withdrawal scenarios, HMRC has stated that the UK |
| payment plus a surcharge of up to 15%. | | | | fund would be treated as the first part of the purchase |
| If the taxable property is a home or timeshare, the tax | | | | cash. |
| is the annual rent received, if this is over 10% of the | | | | For instance if you transferred £50,000 in to a |
| property value or 10% of the property value if it is less. | | | | Qualifying Recognised Overseas Pension Scheme and |
| Capital gains tax is also charged on disposal of taxable | | | | subsequently topped up the fund with £30,000 |
| property, but this is expected not to figure in penalties | | | | that had not received UK tax relief, then bough a |
| for non-UK residents, who are not liable for CGT. | | | | classic car for £35,000, all that money would be |
| Indirect investments are also taxed | | | | considered an unauthorised withdrawal even though |
| The rules are also expected to cover direct and | | | | you has the £30k to 'cover' most of the price. |