HMRC rule changes may push Guernsey out of Qrops market

Guernsey could be forced out of the qualifying recognised overseas pension schemes (Qrops) market as a result of legislation due to come into force next year.

HM Revenue & Customs (HMRC) plans to update Qrops legislation in the Finance Bill 2012 in order to clamp down on abuse. The draft rules, published last week, included a clause that would tax non-resident Qrops members at the same rate as local residents. 

This change is damaging to Guernsey as Qrops income is paid gross to non-residents as opposed to net of tax. Guernsey is known as a third jurisdiction Qrops provider because those who use its schemes do not live on the island.

Bethell Codrington, head of TMF International Pensions, said: ‘Guernsey will either have to change its tax legislation and not tax pension funds for Guernsey residents, or it will have to tax Qrops at the local rate [of 20%].’

Codrington said the only way Guernsey could avoid the new rules would be through a double tax agreement with other jurisdictions. Guernsey would then only have to charge the difference between its own rate and other jurisdictions.

Roger Berry, chairman of the Guernsey Qrops Committee, said the island would lobby HMRC to make allowances for the island.

‘[There is] no doubt the regulations are intended to remove Guernsey from being able to market Qrops,’ said Berry.

‘In January we will lobby on the basis we are the safest jurisdiction with no history of abusive behaviour. The legislation is directed to where there is abuse.’

David Trenner, technical director at Intelligent Pensions, said: ‘It was an unexpected clause. Guernsey is in the worst position. I think the Isle of Man could also be affected but Malta and Gibraltar should be OK.’