HMRC updates overseas pension guidance – everything you need to know about UK tax rules
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Pension plans based abroad can only receive a UK tax-free transfer from a registered pension scheme if it’s a qualifying recognised overseas pension scheme (QROPS). Owners of these schemes will need to tell HMRC about payments from these savings plans that have received UK tax relief.
These rules were updated today, and pension managers will need to tell HMRC within 90 days when they make a payment, which includes transferred from pension savings that are paid either:
- Into an overseas scheme on or after April 6 2017 that have benefited from UK tax relief were transferred to a scheme in the last 10 years
- To or in respect of a scheme member who’s a UK resident or has been a UK resident in the previous five tax years
- To or in respect of a scheme member who’s a UK resident or has been a UK resident in the previous 10 tax years, if the transfer to the scheme from a registered pension scheme was made on or after April 6 2017
- In the five tax years after the transfer from a registered pension scheme before April 6 2017
The following will have to be reported:
- When regular pension payments are made
- lump sum payments
- Pension transfers
- When the member surrenders their pension funds or gives them to someone else
This is important to note as HMRC can remove QROPS status if it’s not updated promptly or if incorrect information is given.
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HMRC has a list of recognised overseas pension schemes (ROPS) that have told the Government they meet the conditions to be a recognised scheme.
However, HMRC warned they cannot guarantee the schemes listed are ROPS or that any transfers to them will be free of UK tax.
It will be up to individual pension holders to find out if they have to pay tax on any transfer of pension savings.
Where overseas transfer charges apply, the scheme managers must tell members (or the holders) certain information within 90 days of the transfer.
This includes the date of the transfer, that an overseas transfer charge applies and the amount of tax that needs to be paid.
Where a person lives abroad but is classed as a UK resident for tax purposes, they may have to pay UK tax on their pension(s).
The amount that needs to be paid will be dependent on the person’s income.
If a person is not a UK resident, they don’t usually pay UK tax on their pension.
However, they may have to pay tax in the country they live in.
There are exceptions to this, with an example being that UK civil service pensions will always be taxed in the UK.
Full details on pension tax arrangements can be found on the Government’s website.
Additionally, impartial guidance can be sought from the likes of the Money Advice Service, Pension Wise and Citizens Advice.
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