Gaines-Cooper case could prompt migration to QROPS

The collapse of the Robert Gaines-Cooper case could see high net worth individuals flock to Qualifying Recognised Overseas Pension Schemes (QROPS) in a bid to dodge the taxman.

"Multi-millionaire entrepreneur and Seycelles resident Gaines-Cooper was liable to pay UK tax despite spending less than 91 days a year in England because the country had remained "the centre of gravity of his life and interests", the Court of Appeal ruled in a landmark case this week.

The decision is being described as the "thin edge of the wedge" for HNW individuals, but they could help protect themselves from HMRC's ire by moving pension assets out of Britain using QROPS.

"UK pensions can be neatly moved to a QROPS scheme and in addition to the many benefits people have over remaining in the UK scheme, for those who have moved abroad there is now the added advantage that it moves a major asset out of the UK," Tim Parkes, director of Carey Pensions and Benefits, says.

Advisers have seen a sharp uptake in interest in QROPS in light of the Gaines-Cooper case.

But specialist QROPS advisers are warning people to beware overseas advisers who make undeliverable promises.

Geraint Davies, managing director of Montfort International, who helped draft guidance on QROPS with the Personal Finance Society (PFS) says: "The facts are you do not have to be a non-UK resident for five years to access QROPS but you do to permanently remove any of the restrictions which exist under UK tax legislation."

"Even then individuals will be subject to the tax regime of the territory of residence and all other areas in which the person has lived."

In addition, he says QROPS are only tax-neutral where the country of residence has been checked by the recommending adviser and there are no tax liabilities levied on unrealised gains or distributions out of the scheme.

"The issue is there is too much advice on QROPS coming from providers and advisers have little experience dealing with the tax regimes of other countries. Plus some unscrupulous overseas advisers are making substantiated claims."

FSA guidelines on QROPS states: "Any adviser who fails to take into account all current material personal circumstances and future plans is failing to treat the customer fairly."