The UK's HMRC Issue New Guidance Regarding QROPS And Residential Property

Posted by Paul Davies on 19/11/09 14:02

On 16th November 2009, the UK’s HMRC (Her Majesty’s Revenue and Customs) have issued an update in their Registered Pension Scheme Manuals confirming the situation regarding residential property (and other taxable property) within QROPS (Qualifying Recognized Overseas Pension Schemes).

This update has been issued by HMRC because there has been much misinterpretation in some quarters regarding residential property as an investment, within QROPS, after the 5 year reporting period.

What has the guidance confirmed?

The guidance has confirmed what the Global QROPS Ltd advisory team already knew, which is the 5 year QROPS reporting period that applies to the payment of QROPS benefits, to a member, does not apply to permitted investments within a QROPS.

It has been incorrectly assumed by people, in the past, that because after 5 complete UK tax years of a QROPS member’s overseas residency benefits can be paid in accordance with local rules of the jurisdiction  (such as income and tax free cash), that investments would also be outside of the UK HMRC’s reporting requirement after the 5 year period.

However, because taxable property investments (such as residential property) are not subject to the same rules as member payment charges in the Finance Act 2004, the ‘5 year rule’ does not apply. There is, in fact, no time limit on the requirement for the QROPS ‘manager’ to report a purchase of a taxable property. Therefore, regardless of how long an individual has been outside the UK, they can not purchase a residential property as an asset within a QROPS.

Global QROPS Ltd would like to stress that these taxable property rules have always applied. The recent guidance HMRC have updated, on their website, has been produced to make this clear.