QROPS Due Diligence Expected By HMRC Revealed At Last


Retirement savers transferring  pension money to an offshore QROPS are warned to carry out ‘due diligence’ to check the scheme is not a scam – but are offered little advice about the questions they should ask.

HMRC’s QROPS List explains that savers and their advisers need to investigate a QROPS to make sure the scheme meets strict qualifying rules.

They are also warned HMRC will chase them with tax penalties if they break the rules about moving their money.

However, buried in online guidance notes explaining the overseas transfer charge due on QROPS are some clues about questions to ask a prospective offshore provider.

No list of checks

“HMRC cannot provide a list of all the checks required on making a transfer. The questions and checks required will vary depending on the facts and circumstances of each individual transfer. HMRC cannot confirm whether or not any individual transfer will, or will not be, an unauthorised payment,” says the guidance.

The guidance goes on to explain how pension administrators and managers should approach their due diligence.

“Scheme administrators need to prove to HMRC that they took reasonable care in establishing the correct position before making the transfer,” says HMRC.

“What constitutes ‘reasonable care’ will vary depending on the individual facts and circumstances of each case. This does not necessarily mean that scheme administrators need to ask for evidence of compliance with every one of the conditions to be a QROPS.”

Four warning signals

HMRC suggests asking QROPS managers check four points flagged as warning signals that the scheme is not a QROPS but a pension liberation vehicle:

  • If the bank receiving the transfer is not in the same country as the QROPS is based
  • If the bank receiving the transfer is not in the name of the pension scheme which should receive the transfer
  • If the scheme administrator is not based in the same country as the receiving scheme
  • If the scheme administrator is not a representative of the pension scheme but, for example, a financial adviser, or they are asked to act through a third party

“This is not an exhaustive list and scheme administrators and managers should not take it that these are the only checks that are required,” says HMRC.

“Any genuine pension scheme should be able to provide details of their scheme, eg scheme rules and membership booklets, and their regulatory and tax status. QROPS scheme managers should be able to explain how the tax and any regulatory rules for their country apply to their scheme, just as scheme administrators will be able to explain how UK tax and pension regulation rules apply to their registered pension scheme.

“If a scheme manager is reluctant to provide such information this should be questioned.”