Transfers: transfers to a QROPS: scheme manager actions – before the transfer
From 9 March 2017 the scheme manager of a qualifying recognised overseas pension scheme (QROPS), or former QROPS, has to satisfy certain requirements under UK legislation before they make a transfer to another QROPS.
If a QROPS scheme manager fails to carry out these actions before a transfer HMRC can remove the scheme’s QROPS status (excluding the scheme from being a QROPS).
Tell the member the information they need to give to the scheme
Regulation 3AE(6) The Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 – SI 2006/208
Section 244I Finance Act 2004
If a member of a QROPS, or former QROPS, wants to transfer to another QROPS, and the funds to be transferred include a ring-fenced transfer fund:
- which is not a pre-9 March 2017 fund (see PTM102300)
- for which the relevant period (see PTM102200) has not expired, and
- on which the overseas transfer charge has not been paid in respect of an earlier transfer of those funds
the member needs to provide information to the scheme manager before the transfer.
PTM102900 sets out the details members should pass to the scheme manager before the transfer is made. The scheme manager of a QROPS or former QROPS must tell the member:
- if they are required to provide information and
- what information and statements are required.
Scheme managers must do this within 30 days of the member requesting a transfer out of the scheme. A transfer request is when a member has made a substantive request to the scheme manager on which they are required to take action in relation to the transfer. A casual enquiry is not a transfer request.
If the member does not give all the required information and statements to the scheme manager before the transfer is made, the transfer may be subject to the overseas transfer charge (see PTM102200 and PTM102300).
The scheme manager should be able to identify from their scheme records – see the section ‘Is the transfer subject to the overseas transfer charge?’ below – when a member needs to give the scheme manager information before a transfer.
Is the receiving scheme a QROPS?
Unlike scheme administrators of registered pension schemes, the scheme manager will not be liable to UK tax charges if the receiving scheme is not a QROPS. However scheme managers still need an answer to this question to determine if:
- the transfer could be subject to the overseas transfer charge – for which the scheme manager is liable, or
- the member is liable to the unauthorised payments charge (and potentially the unauthorised payments surcharge) as the transfer is an unauthorised payment taxable under the member payment provisions – see PTM113210.
Is the transfer subject to the overseas transfer charge?
The onward transfer of a ring-fenced transfer fund (see PTM113230) from a QROPS (or former QROPS) to another QROPS within the relevant period (see PTM102200) may be subject to the overseas transfer charge.
In certain circumstances a transfer to a QROPS may be excluded from the overseas transfer charge (see PTM102300).
Where a transfer is subject to the charge it is the transferring scheme manager who is jointly liable with the member to the overseas transfer charge.
HMRC expects scheme managers to:
- identify that the overseas transfer charge is due,
- calculate the amount of tax due,
- deduct the tax due from the amount to be transferred and
- pay the tax to HMRC.
The scheme manager will be liable for interest and penalties for late payment of tax unless HMRC agrees that scheme manager may be discharged from liability to the overseas transfer charge in accordance with PTM102700.
Failure to operate the overseas transfer charge correctly is also grounds for HMRC excluding the scheme from being a QROPS.
Scheme managers should use the information provided by the member (as per PTM102900) together with their own records to identify if a transfer out of their scheme is subject to the overseas transfer charge.
The records kept by a scheme manager of a QROPS (or former QROPS) should be able to identify for each member’s pension rights under the scheme:
- which funds , if any, received UK tax relief and so make up a UK tax-relieved fund (see PTM113230)
- which funds, if any, were derived from a transfer and so are either relevant transfer funds or ring-fenced transfer funds (see PTM113230), and
- the date of receipt of any transfer into the scheme in respect of the member
In respect of any transfer received from a registered pension scheme on or after 9 March 2017 whilst a scheme is a QROPS, the scheme manager should have received a transfer statement from the scheme administrator in accordance with PTM103050. This will tell the scheme manager:
- whether or not the transfer was subject to the overseas transfer charge,
- if the transfer wasn’t chargeable, the reason why the transfer was excluded from the tax charge,
- if the transfer was chargeable, the amount of the tax charge.
If the overseas transfer charge was paid on a transfer out of a registered pension scheme and has since been repaid, the scheme administrator should have told the scheme manager about this in accordance with PTM103050.
Where the scheme has received a transfer from a QROPS or former QROPS on or after 6 April 2015, the scheme manager should have received a transfer statement from the transferring scheme manager in accordance with PTM103150.
From these scheme records the scheme manager should be able to identify if the member’s pension rights being transferred include one or more ring-fenced transfer funds, and:
- the key date (see PTM113230) for each of the ring-fenced transfer funds
- the relevant period (see PTM102200) for each of the ring-fenced transfer funds
- whether or not a ring-fenced transfer fund is a pre-9 March 2017 fund (see PTM102300)
- whether or not the overseas transfer charge has been paid previously (and has not become repayable) in respect of an earlier transfer of those funds.
If the scheme records indicate that a transfer may be subject to the overseas transfer charge, the information provided by the member can be used to identify whether or not the transfer is excluded from the charge.
As for scheme administrators of registered pension schemes, HMRC expects scheme managers to consider critically the information provided by the member. Where due care has not been taken in establishing the correct position of the transfer HMRC will not discharge the scheme manager from liability to the overseas transfer charge as explained at PTM102700.