HMRC move curbs transfer of funds to home countries
French and Italian expatriates in the UK who wish to return home after Brexitface a new problem after British authorities in effect blocked them from taking their pensions with them.
HM Revenue & Customs has removed all French and Italian pension schemes from its list of international schemes said to meet the conditions for accepting UK retirement pots.
Pension savings amassed in the UK that are transferred abroad into schemes not meeting HMRC’s approval are liable for UK tax charges, which can amount to half the value of the fund.
Last month, 11 French and 19 Italian pension schemes were on the list of recognised overseas pension schemes published monthly by HMRC. But no schemes were listed for either of these countries when an updated list was released this week.
“HMRC was getting worried about pension money flowing out of the UK to offshore schemes which weren’t compliant with its rules,” said Geraint Davies, managing director of Montfort International, which advises on overseas pension transfers.
“They were particularly worried about offshore schemes that allowed cash — which had benefited from tax relief in the UK — to be taken before age 55, a move that will result in big tax charges in the UK.”
There are still dozens of German schemes on HMRC’s list and two for Spain. These schemes do not allow access to pension cash before the age of 55.
Household company names in France were among the schemes removed from the British list, including insurance companies Swiss Life, Axa and the UK-listed Aviva.
It’s not a terribly happy situation for anyone who wants to move their pension fund to France or Italy. They may to have to shift their fund to Gibraltar or Malta or the pension will have to be left behind in the UK, unless they can think of something else to do with it
“All French Qualifying Recognised Overseas Pension Schemes (QROPS) have been removed from the British taxman’s official list of offshore pensions because French legislation allows scheme members to access scheme funds before age 55 in a variety of exceptional circumstances, such as unemployment,” said Swiss Life.
Mr Davies said the move would have a “significant” impact on anyone planning to move pension cash from the UK to these European countries.
At present, about 300,000 Italian- and French-born individuals live in the UK but the move will also affect Britons who had planned to retire to sunnier climes in Europe.
”Transfers to France and Italy are now effectively blocked,” added Mr Davies. “Unless these countries change their pension rules so they match the UK’s, then this is permanent.”
Experts said it was difficult to estimate the amount of UK pension money flowing to these countries, traditionally popular with British retirees. But in the past tax year about £1.5bn in pension cash was shifted offshore, according to HMRC figures.
“It’s not a terribly happy situation for anyone who wants to move their pension fund to France or Italy,” said James McLeod, head of pensions and general counsel to AES, an advisory firm.
“They may have to shift their fund to Gibraltar or Malta or the pension will have to be left behind in the UK, unless they can think of something else to do with it. This is another headache for overseas workers planning to return home after Brexit.”
When asked why it had delisted the schemes, HMRC said: ‘We do not comment on identifiable schemes or jurisdictions’.”