Budget 2024 - QROPS, ROPS, OPS and further chops
Andy Wood • October 31, 2024
QROPS, ROPS, OPS and further chops
Introduction
The QROPS provisions allow the transfer of funds from a UK registered pension scheme to an overseas pension scheme without it being an unauthorized transfer.
Further, OPS and ROPS, as well as providing the building blocks for QROPS status, also provide for some benefits in their own rights.
Back in 2017, the Government curtailed some of the benefits and introduced something call the Overseas Transfer Charge.
Budget 2024, providing further chops to this regime.
Overseas Transfer Charge (“OTC”)
The Overseas Transfer Charge (OTC) is a 25% tax charge on transfers to QROPS, unless an exclusion from the charge applies.
That exclusion, prior to this announcement, applies in two distinct cases:
- Where the transfer is to a scheme resident in the same place as the member; and
- Where the transfer is to a scheme established in the EEA and Gibraltar
However, for transfers taking place from 30 October 2024, the second exclusion is removed.
The European Economic Area (EEA) is a single market that includes the 27 European Union (EU) member states and the three European Free Trade Association (EFTA) countries of Iceland, Liechtenstein, and Norway
This is likely to be deleterious for QROPS providers in those affected jurisdiction.
The Government also announced that from 6 April 2025, the conditions of OPS and ROPS established in the EEA will be brought in line with OPS and ROPS established in the rest of the world, so that:
- OPS established in the EEA will be required to be regulated by a regulator of pension schemes in that country
ROPS
All QROPS are OPS and ROPS, but not all OPS and ROPS are QROPS!
This word salad is relevant.
This is because, in the Budget, the Government also announced that from 6 April 2025, that there will no longer be separate requirements for a scheme established in an EEA as opposed to the rest o the world.
Broadly, this means that:
- An Overseas Pension Scheme (“OPS”) established in the EEA will be required to be regulated by a regulator of pension schemes in that country; and
- A Recognised Overseas Pension Scheme (“ROPS”) established in the EEA must be established in a country or territory with which the UK has a double taxation agreement providing for the exchange of information, or a Tax Information Exchange Agreement
As such, this might affect some QNUPS providers.
UK Registered Pensions
Also, added on to this particular budget missive is that, from 6 April 2026, scheme administrators of registered pension schemes must be UK resident.
Conclusion
These changes seem to be as a direct result of Brexit. As the UK is no longer in the EU, it can shrink the scope of tax relief and benefits. It might have taken a few years, but it seems like this is beginning to take place, starting with overseas pensions.
For over two centuries, the UK’s non-domiciled tax regime and its remittance basis has been a cornerstone of tax planning for wealthy expats and international families. It was introduced, along with income tax, by Willian Pitt the Younger at the very end of the 18th century. It was part of the fiscal firepower necessary to battle Napoleon Bonaparte. And, like income tax, it had pretty much been a constant feature of the UK’s system ever since. But in March 2024, the then Chancellor, Jeremy Hunt, rang the death knell for the remittance basis, with Labour’s Rachel Reeves – who would succeed Hunt a few months later - declaring she would have abolished it anyway. The end is therefore very much nigh for the UK’s non-dom tax regime. More specifically, the end is 6 April 2025. However, out with the old and in with the new’ goes the saying. As such, the ‘what comes next’ will reshape the tax landscape for non-doms, expats, and international investors with a UK footprint (or those considering creating one). What is Domicile (and Non-Domicile)? Domicile is not a straightforward concept like tax residence. The latter is largely about physical presence (or otherwise) in a particular. Instead, as well as physical presence, it also requires an understanding of your future intentions. Is a place somewhere that you intend to live permanently or indefinitely. There are two main types of domicile that I will discuss here: • Domicile of origin: This is inherited at birth, usually from your father (if you think that is misogynistic then I don’t make the rules, OK?). You do not lose your domicile of origin. However, think of it as the foundations of a building. You can a domicile of choice on top it. • Domicile of choice: You build a new domicile of choice by achieving two things. Firstly, by physically residing in place and, secondly, by forming the intention to stay in that same place permanently or indefinitely. Both must be present.
So you’ve left the UK for pastures new. The sun is shining. You're making more money. You’re enjoying a great quality of life in a new country. In fact, you’re totally de-mob happy. Even better, as a non-UK resident, UK taxes are a dim and distant unpleasant memory, right. Right? Wrong. I don’t necessarily see my role in life as chief balloon popper. However, there are some Uk tax things you should bear in mind before declaring yourself a tax exile. Am I really non-UK Resident (“NR”)? Up until 2013, the UK didn’t really have a statutory definition of residence for tax purposes. Yes, that’s as crazy as it sounds. Fortunately, the Statutory Residence Test (“SRT”) was introduced from 2013. The idea is that it provides a degree of objectivity through a series of tests. Although a statutory test, other than in straightforward cases, it can still remain complex.
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