Protect your Pension from Inheritance Tax with a QNUPS
Brief History of QROPS
QROPS or Qualifying Recognised Overseas Pension Schemes were first launched in April 2006 and are a type of International Pension Scheme established outside of the UK.
QROPS are recognized by the UK authorities to receive transfers from UK Pension funds registered with Her Majesty’s Revenue & Customs (HMRC).
QROPS were intended for anyone holding a UK Pension Fund that intended to retire overseas on a permanent basis.
They offered greater flexibility of investment compared to a UK Pension Fund.
QROPS and UK Inheritance Tax
Although the intention was that QROPS be tax except from UK Inheritance tax (IHT) the legislation did not make this clear and unambiguous.
This caused concern and confusion as potentially QROPS could be subject to IHT under the Inheritance Tax Act 1984.
Subsequently HMRC admitted their mistake and confirmed that this was indeed an error.
The outcome was that two further pieces of legislation were introduced, namely the Finance Act 2008 followed by the Inheritance Tax –Qualifying Non-UK Pension Schemes Regulations 2010.
Thus it was that QNUPS (Qualifying Non-UK Pension Schemes) were introduced on the 15th February 2010 .
QNUPS offer much greater freedoms and benefits over their predecessor QROPS and this was initially questioned by financial experts as to whether this was intentional or a further blunder by the regulators. But it appears not to have been a mistake and indeed QNUPS as well as offering protection against UK Inheritance tax also offer the ability to transfer almost any type of asset such as real estate , stocks and bonds, fine wine collections etc. under the protection of the scheme.
QROPS holders can also hold a QNUPS. Under certain conditions a QROPS can be transferred to a QNUPS.
Recent QROPS Legislation
On 9th December 2010, the UK Government announced additional changes to UK pension tax legislation in order to crack down on tax avoidance. From April 6th 2011, tax free withdrawals made from QROPS whilst Non-UK Resident will be taxed if they return to the UK within 5 years.