Where are the new QROPS danger zones?

Advisers have been left wondering where the next qualifying recognised overseas pension schemes (QROPS) scandal will come from after a series of clamp-downs by HMRC.

The Revenue is currently consulting on creating a blacklist of risky overseas tax avoidance schemes, rather than investigating schemes reactively.

Some industry experts believe this could spell major trouble for QROPS in New Zealand, which could be next on HMRC’s hitlist.

Geraint Davies, managing director of Montfort International which specialises in QROPS advice, warned the schemes are being used in New Zealand to “wash out” pension pots tax free.

He added this “smash and grab” approach, in which people are able to withdraw their pension funds over a weekend, often comes with 15% commissions for advisers and providers doing the business.

Some sources have predicted New Zealand could now be blacklisted by HMRC, as Hong Kong and Singapore have been in recent years.

However, other industry figures have claimed HMRC takes a more lenient approach to tax abuse in New Zealand and other jurisdictions.

Michael Reason, partner at Michael Reason International Business Lawyers, said: “Australasian jurisdictions have been non-compliant but left to carry on but others such as Hong Kong and Singapore have not.

“The Channel Islands too feed into the UK economy so they are left alone. It depends on where HMRC has an interest.

“The cash-out business in New Zealand is still going on, just with different players. The question is: is there a regulator that can deal with it?”

HMRC was non-committal about whether a blacklist of New Zealand QROPS was forthcoming, but rejected the notion of different treatment of jurisdictions and reiterated its commitment to tackling tax abuse.

A spokesperson said: “It is completely incorrect to suggest that some jurisdictions get preferential QROPS tax treatment to others based on their relationship with the UK.

“UK regulations apply to all QROPS, wherever they are established.

“HMRC has a responsibility to ensure that all QROPS providers act within the rules, and where it has been established that is not the case, HMRC will not hesitate to remove any scheme from the recognised list.”

There is a possibility schemes in New Zealand could tidy themselves up, as QROPS providers in the country are creating a code of conduct for business in a bid to tackle malpractice.