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PAY AS YOU GO

As the dust settles following the announcement of a 25% overseas transfer charge in the spring Budget, advisers are starting to think about how they can continue to engage with their clients who have UK pensions

Technical briefing Overseas transfer charge

David White Partner, The Qrops Bureau

‘AN INDIVIDUAL WITH A UK PENSION WOULD NOT MOVE TO SPAIN, FOR EXAMPLE, TO SAVE TAX ON THEIR PENSION INCOME’

One of the exceptions to the overseas transfer charge (OTC) is when the client is a European Economic Area (EEA) resident and the transfer is being made to an EEA-based Qrops.

One reason for this exception is likely to be that the UK’s HM Revenue & Customs would not be permitted to restrict European Union pension transfers under freedom of movement of capital rules. Another is that the levels of income tax in most EEA countries is broadly in line with the UK.

The OTC has been brought in to reduce tax avoidance. An individual with a UK pension would not move to Spain, for example, to save tax on their pension income. The transfer charge can be reviewed if the member moves within five complete tax years of the date of transfer – the ‘relevant period’.

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