QROPS ADVICE: HMRC faces fresh QROPS legal challenge

London & Colonial Assurance, an insurance, pension and investment company, may mount a legal challenge against HMRC over its apparent opposition to QROPS schemes based in its domicile, Gibraltar.

The firm, which also has offices in the UK, has sought legal opinion from two separate QCs. Both assert HMRC is wrong in its contention that Gibraltar’s 0% rate of income tax for over 60s’ is incompatible with QROPS rules. Its barristers have also questioned whether the UK’s position will withstand scrutiny from the European Union, of which Gibraltar is a member.

London & Colonial (L&C) currently has no QROPS scheme of its own but may launch one and is keen to ensure it home jurisdiction’s rules are deemed compatible with UK legislation.

For the past six months, Gibraltar pensions providers have been operating under a voluntary ban on new QROPS business until the quarrel with HMRC is resolved. It arose earlier this year after pension providers in Gibraltar received letters from HMRC asking for clarification of its pension rules.

Ken Wrench, L&C chief executive, said it was irrelevant what tax Gibraltar pensioners paid, or did not pay, to UK coffers, even if a UK resident was paying into a Gibraltar scheme.

“Why is HMRC being difficult and delaying its agreement to QROPS in Gibraltar? If it is simply the interpretation of the letter of the regulations, then it is about time HMRC either agree that a favourable interpretation is acceptable or change the regulations. Gibraltar is an ideal jurisdiction for QROPS – it is within the EU, well regulated, the currency is sterling, the language English and the common law legal system is similar to the UK,” said Wrench.

HMRC global scrutiny
Gibraltar is not the first territory to face HMRC investigation into its pension rules. Last year all Singapore schemes were deemed incompatible with QROPS rules and HMRC no longer permits providers to domicile QROPS there.

Providers in Gibraltar are expecting a response from HMRC next week over the status of their schemes. If HMRC rules they are not compatible, L&C said it would seek to challenge the position in the courts.

It would not be the first company to resort to legal action. Panthera, a provider that operated a scheme out of Singapore, is currently preparing a similar challenge.
by Dan Judge http://www.international-adviser.com/lwm/article/920