Offshore

QROPS, pronounced, I am advised, Queue-Rops, look set to be quite popular with the more mobile retirees.  If you have not yet heard of them, you are hardly alone but I would expect much to said of them in years to come.

QROPS stands for a Qualifying Recognised Overseas Pension Scheme and is recognised by HMRC for the purposes of receiving transfers in from UK pensions.  There is, as you would expect a bit more to it, but UK legislation allows for those resident overseas to shed many of the restrictions imposed on UK pensions, such as the requirement to provide an income for life and where the funds are invested.  Members may be able to take the whole fund as a cash sum or purchase residential property, for example.

It pays to take advice, of course, because it may be a case of out of the frying pan into the fire, some tax regimes are nowhere near as generous as the UK.  For some, though, particularly the better off, the prospect of getting their mitts on the whole of the fund will be extremely tempting.

For a long time, the UK has been something of a tax haven for foreigners working or residing here.  The fact is that non-domicile residents are not taxed on overseas earnings or assets so long as the money remains offshore (there is a bit more to it than that, but that is the gist of it).  This has long annoyed many people, including the Unions, and Labour promised to do something about when they were elected back in 1997 but it has proved more problematic than expected.  Many non-domiciles (domicility is normally taken from the father and is usually permanent and difficult to change and is different to residence) do not have much stashed away abroad but some have a great deal.

One difficulty is that those with a lot of money overseas find tax optional, anyway.  They are highly mobile and are able to spend freely on advice.  They also tend to spend freely in the UK and the Government is keen not to see that money being spent elsewhere as it is useful to the economy and generates much tax indirectly.  

I suspect that some of the most vocal opponents of this tax break were the very people who have, themselves, benefited whilst working abroad or plan to move to Spain but keep their cash hidden in Gibraltar.  Anyway, 'something' had to be done so the Treasury seems to have come up with a fudge.  To retain non-domicile status will require a payment to the tax man of £30,000.  To a billionaire, this is a mere bagatelle, but to the majority of people working here (and paying National Insurance and Income Tax, from which they may derive few benefits) with a few thousand oversees, this will be punitive.  Of course, those here for a few years may just take a gamble and not disclose their overseas money but a few hapless people will be forced to give up their tax break.

It is hard to see that it will raise much for the Treasury but it may just make the UK a slightly less attractive place to do business and a number of competing countries are rubbing their hands in glee.