Transfers to QROPS requested on or after March 9, 2017 will be taxed at a rate of 25% unless at least one of the following apply:
- both the individual and the QROPS are in the same country after the transfer ;
- the QROPS is in one country in the EEA (an EU Member State, Norway, Iceland or Liechtenstein) and the individual is resident in another EEA after the transfer;
- the QROPS is an occupational pension scheme sponsored by the individual’s employer;
- the QROPS is an overseas public service pension scheme and the individual is employed by one of the employer’s participating in the scheme; or
- the QROPS is a pension scheme established by an international organisation to provide benefits in respect of past service and the individual is employed by that international organisation.
UK tax charges will apply to a tax-free transfer if within five tax years, an individual becomes resident in another country so that the exemptions would not have applied to the transfer. UK tax will be refunded if the individual made a taxable transfer and within five tax years one of the exemptions applies to the transfer. It is the responsibility of the individual to make such a tax reclaim.
Tax on UK pensions works by receiving tax relief on the way into the pension and then it is taxed when you take income. By transferring to an overseas scheme, HMRC will not get the opportunity to receive any tax from income payments. Applying the QROPS tax charge levels the tax playing field for people remaining in UK-based pensions but still gives those people the opportunity to avoid a tax charge if they have genuine reasons to transfer to overseas schemes.