GUERNSEY’S income tax authorities are imposing further restrictions to stop potential misuse of pension schemes in the island.
The move comes as publicity in the local and national media over the last few months has been growing about the perceived misuse of overseas pension schemes that have qualifying recognised overseas status for the purposes of receiving transfers from UK schemes.
As a result, the Treasury and Resources Committee instructed the administrator of income tax to contact HM Revenue & Customs in order to identify its concerns and establish how they could be allayed.
‘We are now acting to maintain Guernsey’s good international reputation and to ensure that there is no damage to quite legitimate pensions business, which forms a significant part of this particular sector of the finance industry,’ said administrator Rob Gray (pictured).
Existing legislation allows the administrator to impose conditions on Guernsey Retirement Annuity Trust Schemes – a discretionary trust which acts as a self-administered private pension scheme for Guernsey residents – seeking approval in respect of locally-resident members, under the appropriate part of the Income Tax Law.
But additional conditions are now being imposed on the approval of any scheme which can admit non-residents of Guernsey for membership.
It is intended that this should stop the potential misuse of non-residents being accepted for membership, transferring funds from the UK and then effectively collapsing the fund, taking the benefits tax free.
The same rules would apply to residents and non-residents to ensure that all of the restrictions that apply to locally-resident members of such schemes such as the ages between which the annuity can be taken and, more importantly, the amount of the lump sum, which is restricted to 25% of the fund, would apply.
Conditions are also being imposed on transfers from Guernsey approved pension schemes with Qrops status in order to stop the island being used as a conduit to extract funds from a UK pension scheme and then transfer them to one in another jurisdiction, with the aim of withdrawing all of the funds.
And where funds being transferred are held on behalf of a non-resident and originate, wholly or in part, from an inward transfer payment from a UK pension scheme, the receiving scheme must have obtained Qrops status from HM Revenue and Customs or must have provisions in respect of benefits that are no more generous than those allowed under Guernsey’s domestic legislation.
‘In other words, there should be no ability to take 100% of the fund as a lump sum,’ said Mr Gray.
He added it showed the island was committed to ensuring that pensions schemes are used for their correct purpose.
Article posted on 20th November, 2008 - 2.30pm
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