03 July 2013

Proposed changes to the QROPS regime

On 24 May 2013 HMRC issued draft legislation entitled ‘The Registered Pension Schemes and Overseas Pension Schemes (Miscellaneous Amendments) Regulations 2013’ (the “2013 Regulations”). If enacted in their current form, the 2013 Regulations would bring about a number of changes to the QROPS regime, such as a requirement to periodically reconfirm a scheme’s QROPS status, increased notification obligations (which, for the first time, would apply to former QROPS as well as to QROPS) and an extension of the penalty regime for failure to provide information regarding former QROPS. The 2013 Regulations would also give HMRC the ability to remove a scheme’s QROPS status in a wide variety of circumstances.

Changes have also been proposed in relation to overseas public pension schemes and QROPS established by international organisations, however these are beyond the scope of this briefing, which outlines the most relevant proposed changes and their impact on the QROPS regime, including on existing, future and former QROP schemes.

Changes to the reporting requirements for QROPS

The draft 2013 Regulations, if enacted in their current form, would increase the amount of information that scheme managers have to report in relation to QROPS, both at the point of establishment and when payments are made from a scheme. The proposed amendments to Regulation 3 of the Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 require that more detailed information be provided in relation to QROPS on inception, such as the details of the tax authority for the scheme, details of the taxation regime applicable to members of the scheme, as well as confirmation of the basis on which the scheme satisfies the requirements imposed by regulations 2 and 3 of the Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas pension Schemes) Regulations 2006. New questions would have to be answered on form APSS 253 (the form used to report payments from QROPS). The new form would require the scheme manager to provide the date on which the relevant member left the UK, the member’s full birthday as well as his National Insurance number or any other HMRC reference number.  HMRC would require to be told whether any relevant UK transferred funds remain in the scheme in respect of the member after the transfer. If a payment is made after a member’s death the beneficiary’s name and address, date of birth, National Insurance number and HMRC tax identification number would have to be provided.  These changes would take effect from the date of the coming into force of the 2013 Regulations, which means that additional information would have to be provided in respect of payments from QROPS made after that date only. A further proposed change is that where a scheme ceases to be a QROPS it would be necessary to give a reason for the cessation. Any changes to a QROPS  would have to be reported using HMRC form APSS 251A either: (i)  within 30 days of the date of the change; or (ii) within 30 days of when the inaccuracy or change became apparent; or (iii) a date agreed between HMRC and the scheme manger. The position at present is that such information must be provided ‘without undue delay’.

Reporting requirements for former QROPS

Under the 2013 Regulations reporting requirements would be brought in for schemes that cease to be QROPS with effect from the date on which the 2013 Regulations come into force. HMRC has confirmed in the draft guidance that ‘these requirements will only apply to QROPS that lose or give up their QROPS status on or after the date the proposed regulations come into force’. Consequently schemes that have already lost their status will continue not to be subject to reporting requirements. QROPS which lose their QROPS status after the date on which the new regulations come into force will have to report payments from the scheme, respond to HMRC requests for information and report changes or corrections to information already provided. Essentially, their reporting obligations would mirror those of a QROPS. As is the case with QROP schemes which still have that status, the reporting obligations would cease to apply where the transfer to which the relevant information relates was made more than ten years previously and the member is neither UK resident nor was resident at any point earlier in the tax year or in any of the previous five tax years. Part 7 of Schedule 36 of the Finance Act 2008 contains a penalty regime in respect of schemes that do not comply with an information notice from HMRC. The 2013 Regulations would extend and amend this provision with the effect of making it applicable to former QROPS that do not meet their reporting obligations, treating them as though they had failed to comply with an information notice under Schedule 36.

Ability to exclude schemes

The circumstances in which HMRC can remove QROPS status from a scheme are being extended. By way of background, HMRC can remove QROPS status from a pension scheme even if the scheme meets the requirements to be a recognised overseas pension scheme. Exclusion essentially means that HMRC will contact and inform the scheme manager that the scheme has been excluded. The scheme manager can appeal this decision within 30 days. Thus far it has been possible for HMRC to exclude a scheme for failure to comply with the information requirements, however it is proposed that the following events could also trigger the decision to exclude a scheme:

  • The scheme not having a scheme manager;
  • A significant failure to comply with a requirement imposed by regulations made under s169(4) of the Finance Act 2004 and schedule 36 of the Finance Act 2008 (for example, failure to reconfirm the scheme’s QROPS status to HMRC as outlined below, failure to report to HMRC any payments made from the scheme, failure to fully respond to an HMRC request for information or to notify HMRC of changes or corrections to information previously given to HMRC, amongst other failures); 
  • The provision of materially incorrect or false information in respect of a scheme’s compliance with the above laws and the regulations made under them. 

HMRC guidance advises that failure to comply with a requirement will be considered significant if: (i) it is a failure to give details (information or evidence) that may be or is of significance or; (ii) there are reasonable grounds to believe that the failure may (or does) prejudice HMRC receiving tax that is due. However the guidance emphasises that whether a failure is considered significant will depend on the specific circumstances.  The consequences of exclusion remain the same: any UK transfers would be considered unauthorised payments and be taxable, and any transfer from another QROPS would be taxable unless the member has been non-UK resident for at least five tax years after the date of the transfer of his UK registered pension scheme funds to the transferring QROPS.

Renotification of QROPS status

If the legislation is enacted in its current form, it will be necessary for all QROP scheme administrators to ‘renotify’ HMRC that their schemes continue to comply with the requirements to be a QROPS. The time limits relating to this proposed obligation depend on the date on which QROPS registration occurred, as is more fully detailed below. QROPS administrators of QROP schemes which registered with (and received confirmation of such registration from) HMRC on or after 1 April 2010 will have to renotify HMRC that their scheme continues to be a QROPS no later than five years from the date of registration (and no earlier than four and a half years from that date).  Schemes which received confirmation of their registration with HMRC before 1 April 2010 will have to follow the table which can be found on page six of the draft guidance document to determine the date by which QROPS status must be renotified to HMRC (http://aka.hmrc.gov.uk/pensionschemes/draft-qrops-guidance0513.pdf). Failure to notify HMRC that a scheme continues to meet the requirements to be a QROPS at the appropriate time could result in the scheme being excluded with the resultant effect on transfers. Notification and renotification can be done by completing form APSS 251 and can be submitted by post or electronically.

Information notices under Schedule 36 of the Finance Act 2008

HMRC currently has the power to require a person or scheme to provide information or produce documents to check the tax position of a taxpayer by issuing an information notice. The notice can be sent to the taxpayer or to a third party, including a QROPS or former QROPS. Currently, in order to issue an information notice to a third party of a QROPS, HMRC would need the consent of the member or the Tribunal, however no such consent is needed with respect to a registered pension scheme, an annuity purchased from a registered pension scheme or an EFRBS. The position with regards to QROPS would be changed under the 2013 Regulations to fall in line with that relating to registered pension schemes, so that information requests could be sent to third parties without member or Tribunal consent in relation to QROPS or former QROPS. This change would take effect from the date of the Royal Assent to the Finance Act 2013.


The main changes to the QROPS regime which are proposed by the 2013 Regulations are (i) the requirement to ‘reregister’ QROPS; (ii) the extension of information to be reported by scheme managers; (iii) the extension of the reporting requirements and penalty provisions to schemes that will cease to have QROPS status; and (iv) the wider powers to exclude schemes.  Whilst the changes do not seem as drastic as those announced in 2012, together they paint a picture of an ever tightening QROPS regime. The proposed 2013 Regulations further highlight the importance of keeping abreast of changes to the QROPS regime and acting accordingly to avoid  wide-reaching penalties. To download this briefing note as a PDF click here.


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