The number of chargeable transfers of Qualifying Recognised Overseas Pensions (QROPS) fell substantially last year, netting the government far less income than anticipated.
A Freedom of Information request by Canada Life revealed that 13 overseas transfer charges were paid to HM Revenue & Customs in the 2019/20 tax year, down 46% compared to the previous year.
The total charges for the year amounted to just over £1 million, significantly lower than the £60 million the Government predicted when the 25% transfer charge was introduced in 2017. However, the figure was up 32% on the £760,846 recorded during the 2018/19 tax year, due to the transfer values involved.
Typically, the transfer charge applies unless the member is resident in the same country in which the QROPS is established, or the member is a resident in a country within the European Economic Area and the QROPS is established in a country within the EEA.
Andrew Tully, technical director, Canada Life, said the introduction of the charge had “effectively done the job in limiting the appetite” for moving pensions to destinations outside of the UK.
Tully said: “We’ve witnessed a steady fall in QROPS transfer activity since the peak of 2014/15 and this has only accelerated following pension freedoms and the introduction of the transfer charge.
“Despite the number of pension transfers attracting a charge being very small, and therefore the amount of tax raised as a result very low, Treasury will be pleased another tax loophole has effectively been closed and further tax leakage prevented.”
