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Fall in QROPS levies shows govt policy working

11 September 2019

The number of QROPS hit with a 25% overseas transfer charge has fallen significantly over the past year, according to the latest figures.

A freedom of information request published by Canada Life showed that the 25% charge, first introduced in the March 2017 Budget, was levied on 24 transfers in the tax year 2018/19, raising £760,846 in tax.

The number marked a 46% fall in revenue for the Treasury and a 20% reduction in transfers compared to the previous tax year, where 30 transfers were hit with charges totalling £1.4 million.

The government had previously expected the charge to raise £65m for the Exchequer in 2017/18 and £60m in 2018/19.

The transfer charge currently applies unless the member is resident in the same country in which the QROPS is established or the member is resident in a country within the European Economic Area and the QROPS is established in a country within the EEA.

The charge was designed to discourage people from exploiting tax loopholes by transferring funds out of the UK to avoid tax.

Andrew Tully, technical director, Canada Life, said: “It looks like the QROPS charge has done the job in limiting the appetite for moving pensions outside the UK to destinations other than the EEA. The pension freedoms will also have had an effect in the general decline in the number of transfers to QROPS, simply because of the greater flexibility in how people can access their pensions in the UK.

“The number of pension transfers attracting a charge is a very small proportion of the overall number of transfers to QROPS, and as a result the amount of tax raised is very low. However, I’ve no doubt the Treasury will be pleased another tax loophole has effectively been closed and further tax leakage prevented.”