How much do overseas advisors really understand about QROPS?
Posted: 23 March 2010
The chances that the Gaines Cooper ruling got a mention in the foreign press are extremely slim. But yet non-UK advisors advising on Qualifying Recognised Overseas Pension Schemes (QROPS) need to wake up to the reality that QROPS are not to be trifled with. To put it bluntly non-UK advisors are advising on the UK tax residency status of their clients, with potentially very, very serious tax consequences if they do not build a non-UK tax residency strategy. Understanding domicile and tax residency and double tax agreements is not a luxury but an absolute must. Last month, UK’s HMRC achieved a landmark win at the Court of Appeal, in relation to their interpretation of residency laws. It was the interpretation of IR20 that was at stake. The case revolved around British-born entrepreneur Robert Gaines-Cooper who used his interpretation of UK’s non-domicile status to avoid paying UK tax. Unfortunately for Mr Gaines-Cooper he lost and now not only has to source the tax but has to face the music of being UK tax resident. This ruling will impact on QROPS holders wherever based in the world. Do advisors know when their QROPS clients are no longer UK tax resident? Mr Gaines-Cooper did spend less than 91 days a year in the UK. But he was still deemed UK resident and he now faces paying UK taxes dating back to 1993 – estimated at £30million. Mr Gaines-Copper thought that as he had moved to Seychelles in 1976 he was outside UK’s net. But he never met UK’s requirement of non-residency. How many QROPS holders are in the same boat – having not severed UK ties? For many years the business man and his second wife and son had resided for some time at their Oxford estate. His son went to an English school in 2002. His Will was drawn up under English law. Even though Gaines-Cooper pulled in a key witness from the Seychelles (ex-President James Mancham) to back his claim to the hilt that he was permanently resident in the Seychelles – it was all in vain. Is there to be a new residency test? Tax advisers are understandably worried as must any QROPS advisers over the issue of UK residency. Many QROPS advisers with no prior experience of genuine international financial planning have thought they have hit the jackpot with QROPS With the UK Treasury currently considering a new law on residency, advisers around the world need to sit up and take note. Rumours indicate that any possible new rules will not necessarily be based on the number of days individuals are resident in the UK. Regardless of wealth any changes will not just affect the wealthy few – they will apply to all.
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