We’ll CJEU in Court…or not!

The Upper Tribunal has rejected an application by the trustee of the British Coal Staff Superannuation Scheme for an expedited referral of its case to the Court of Justice of the European Union (“CJEU”). The Upper Tribunal decided that the unprecedented circumstances arising from the triggering of Article 50 did not alter its established test, or override its discretionary powers, in relation to making a reference to CJEU; and the trustee’s case had not met those requirements.

The trustee had appealed an HMRC decision concerning withholding tax and applied for its case to be referred to CJEU before being heard in full by the Upper Tribunal. Without an expedited referral, the trustee argued, the length of the judicial process could deprive the trustee of its opportunity to seek CJEU’s assistance before the end of the Brexit negotiations. The Upper Tribunal decided that it was not prepared to assume that “the arrangements that the Government will make for resolving disputes about the interpretation and application of EU law that are pending at the date of UK’s exit will be so unsatisfactory that the Tribunal should change its usual practice”.

The Upper Tribunal did, however, call upon the UK Government to make clear what its proposals will be, commenting that a solution “will have to be implemented because there are likely to be very many people in the same position as the Trustee may be on the date of exit”. Subsequently, the UK Government’s White Paper on the Great Repeal Bill has confirmed that “any question as to the meaning of EU-derived law will be determined in the UK courts by reference to the CJEU’s case law as it exists on the day we leave the EU.” Whether, and how, further UK-derived points of law might become CJEU case law before that day remains to be seen.

Will the new money laundering regulations inspire pension plan spring cleaning?

New regulations, coming into force in June 2017, will introduce stricter EU anti-money laundering requirements into the UK and seem likely apply to pension plans. The potential criminal penalties for breach of the regulations are likely to bring this to the forefront of people’s minds.

Will the new regulations apply to pension plan trustees? 


The draft regulations (and response to an earlier consultation, which took place last year) are interesting because, as currently drafted, occupational pension plans will be caught by some elements of the new regulations. Express trusts (including occupational pension plans) will be required to

  • keep accurate records of all ‘beneficial owners’ of the trust (for pension plans this will mean the trustees, employers, anyone else who exercises control and the beneficiaries) and
  • provide those records to HMRC where the trust has incurred a liability to pay certain taxes (including income tax on dividends).

Respondents to the consultation queried whether HMRC might exclude certain types of express trust from the new requirements. HMRC has stated that as the Fourth Money Laundering Directive includes all forms of express trust, so must the new regulations.

Do pension plan trustees need to take any action? 

Most Likely!

The amount of work involved for trustees and administrators will very much depend upon whether HMRC modifies the definition of a ‘beneficiary’ for pension plans. At present, the regulations as drafted would require trustees to keep accurate data on trustees, employers, other persons who exercise control over the plan and all beneficiaries who can be identified – e.g.  active members, persons in receipt of pension, deferred members. Where a trust has a class of beneficiaries, not all of whom have been determined (for example potential recipients of survivor’s benefits), then trustees will only need to maintain a description of the class of beneficiaries.

Trustees of most plans will also be required to provide information about the pension plan to HMRC, along with all of the data required to be maintained in respect of ‘beneficial owners’. We expect that HMRC might design a form for completion by trustees.

Whilst the new regulations seem likely to cause pension plan trustees administrative headaches, this might not be the case if their implementation follows the course of the 2007 Money Laundering Regulations. When the 2007 regulations were first issued there was confusion around the extent to which pension plan trustees would be affected. In the end, and after the 2007 regulations came into force, HMRC issued guidance stating that occupational pension plans were considered to be low risk and pension plan trustees would not be obliged to register with HMRC.

It’s possible, therefore, that HMRC might modify (through guidance) the effect of the new regulations on pension plans.  Don’t hold your breath, however. HMRC has already stated that it won’t exclude any form of express trust from the requirements.   Additionally, there has been no indication from HMRC so far that the definition of ‘beneficiary’ might be modified for pension plans. Indeed, whilst an occupational pension plan is considered to be low risk, HMRC has said that it does intend using the data collected for other purposes, for example for ensuring early on that the correct amount of tax is paid when there is a payment from a trust to an individual.

What data will trustees need to record?

Trustees will have to keep records that can also be made available to law enforcement agencies and the UK Financial Intelligence Unit. The data to be recorded includes name, address, date of birth, NI number or unique taxpayer reference of all ‘beneficial owners’ and passport details for non-UK resident beneficial owners. Whilst most plans will keep the data required as a matter of course, if the definition of ‘beneficiary’ is not modified for pension plans, trustees will need to make sure that their data is regularly cleansed and is accurate. TPR has been emphasising the importance of accurate data for several years now, so hopefully most trustees will be on top of this. Unlike the penalties for failing to keep accurate records under the TPR regime, however, failure to keep accurate records under the new regulations will be a criminal offence, which could result in a fine and/or up to 2 years’ imprisonment for trustees.

What other impact will there be for trustees?

Under the current money laundering regime, providers who are required to carry out anti-money laundering checks on the trustees of an occupational pension plan (usually when they are first engaged to act) can undertake ‘simplified’ due diligence.  Under the new regulations, service providers would still be able to undertake simplified due diligence but would be required to consider whether it is appropriate. Those being cautious might require additional information about the trust from trustees, including member data records. Whilst we expect most providers will conclude that simplified due diligence would still be appropriate, this is something for trustees to bear in mind (along with the potential data protection issues surrounding the supply of member data to the service provider).

Given the potential for criminal sanctions, trustees may also wish to update their risk registers accordingly.

By what date must trustees be compliant?

The new regulations will apply from 26 June 2017, so trustees will need to be comfortable with the quality of member data records by that date. Additionally, trustees will have to provide information and data to HMRC before 6 April 2018 (or the end of the tax year in which they first become liable to pay any income tax, CGT, inheritance tax, stamp duty land tax or stamp duty reserve tax). This constitutes an ongoing reporting requirement – any changes in a subsequent tax year will need to be notified to HMRC.

What are the practical consequences for trustees?

Whilst nothing is certain until the final form of the new regulations and HMRC guidance are available, it is likely that trustees will have some form of record keeping and reporting obligations under the new regulations. Most trustees are likely to want to instruct their plan administrators to carry out these compliance tasks. Where the work involved increases risk or responsibility for plan administrators there is likely be a knock on effect on administration costs and/or a need to renegotiate administration agreements. A review of any administration agreement could be carried out as part of a review and update in anticipation of implementation of the General Data Protection Regulation. As ever, legal advice is always advisable when service provider agreements are updated.

If you have any questions or need support on this issue, please contact your usual Squire Patton Boggs pension team contact.

Oh Mr Regulator, what big teeth you have got!

“All the better to eat you with, my dear.” And so our precautionary tale begins.

Chapter 1 – Lost in the woods

Once upon a time the Pensions Act 2004 (the Act) was introduced and it gave a variety of enforcement powers to the newly formed Pensions Regulator (TPR). For a time at least, employers and trustees alike were wary of the stick attached to non-compliance, wondering how and when TPR would strike. As the years passed, however, some began to believe that, possibly due to a lack of resources, TPR was unlikely to investigate or penalise many examples of bad behaviour. The threat of being dragged down to Brighton to explain oneself no longer led to the immediate opening of a cheque book – the assumption being that TPR would seek to “educate” the miscreant rather than take enforcement action.

As with all good fairy tales, the baddies could not prosper forever and eventually, something changed. TPR began to fight back.

Chapter 2 – Who’s afraid?

In April 2016, TPR made clear its plans to raise its profile. It began to issue fines to trustees who failed to file their scheme returns on time with a view to clamping down on non-compliance to offer greater protection for members. Following the BHS pension scheme debacle, in respect of which TPR was heavily criticised in the press, it is now appealing for extra powers to promote greater scrutiny to protect members of pension schemes. And earlier this month, to really scare everyone, it issued two press releases on consecutive days about the first criminal convictions it had obtained for failures to comply with the terms of notices requiring information/documentation to be provided to TPR which was relevant in the exercise of its functions.

TPR has the power, under section 72 of the Act, to issue a written notice requiring a trustee, manager, employer, professional adviser or any other person who holds, or is likely to hold, information relevant to the exercise of its functions to produce a document or provide information within a specified time frame. It is a criminal offence under section 77 of the Act to fail to comply with such a notice without reasonable excuse. There is an exception to the requirement to produce documents or information in relation to what are known under section 311 of the Act as “protected items”, essentially material to which legal privilege attaches.

Anecdotally, TPR seems to have been upping the ante in terms of regulatory investigations in recent months and is using its section 72 powers more freely in circumstances where voluntary co-operation would previously have been sought. This month TPR announced that it has now prosecuted a firm of solicitors (and its managing partner) and the head of a charity for failures to comply with section 72 notices. These announcements send a clear message to not only potential targets of regulatory action but also to professional advisers and all other potential recipients of section 72 notices that the obligations under the notices are to be taken seriously and dealt with accordingly.

Chapter 3 – Beware! It bites!

The first prosecution was against a firm of solicitors and its managing partner, who pleaded guilty to failing to provide the requested documents without a reasonable excuse. TPR was investigating a pension scam and had requested documents from the solicitor even though neither the solicitor nor the firm were connected with the investigation, nor had either done anything wrong. The firm provided a variety of excuses in relation to the delay in providing documents, which were eventually only obtained 9 months later after the issue of a search warrant. The court noted a lack of corporate governance at the firm and TPR made it clear that disorganisation was not an excuse not to comply and would not be tolerated. The firm was ordered to pay a £2,700 fine (plus £2,500 costs) and the managing partner was fined £4,000 (plus £7,500 costs) and both were ordered to pay a victim surcharge of £120 each.

This case serves as a stark reminder to professional advisers that, even when they aren’t under investigation themselves, they may still be requested to assist TPR and should comply without delay. Not only can failure to provide such information result in an unlimited fine, those involved can suffer serious reputational damage from being successfully prosecuted for non-compliance with the law. In addition, advisers could also face further action from their professional body. It is hard to think of a reason why an adviser would want to risk their whole livelihood in this way but equally neither negligence nor incompetence will serve as an excuse.

The second prosecution was against Mr M, the Chief Executive of a Hampshire-based charity for the disabled. Mr M, a former trustee of the pension fund, refused to comply with a request for documents for over 18 months. He claimed that, as they contained information about third parties, it would be a breach of French privacy law to hand over certain documents. He also refused to hand over bank statements as he (wrongly) believed they were covered by legal privilege and subsequently refused to provide them on the basis that they would incriminate him. As such, Mr M pleaded not guilty to an offence. Hearing evidence on French law, the court found that Mr M had no reasonable excuse not to provide TPR with the documents and that they were not covered by either French privacy law or legal privilege. Similarly, a failure to provide documents on the grounds of self-incrimination was also not an excuse. Mr M was ordered to pay a £2,500 fine (plus £4,000 costs and a £120 victim surcharge) and it has been reported that his conviction has been referred to the Charity Commission.

In a press release on Friday, TPR confirmed that intervening more frequently and acting quicker are amongst its goals for the next three years – so we may anticipate further prosecutions of this type

Chapter 4 – Seeking a happy ending

For anyone seeking to come up with a “reasonable excuse” for a failure to comply with a section 72 notice, these cases highlight the sort of excuses that will not suffice. To the extent that there is any doubt about the scope of the notice, including whether or not a document falls within the categories requested or whether the privilege exception applies, then the safest course of action would surely be to apply to the court to get that clarified (as happened in Bloom v TPR) rather than risk prosecution and the further damage that that would incur. After all, we all want to live happily ever after.

Budget resolutions and the UK general election: what does it mean for pensions?

A client asked me a pertinent question yesterday, along the lines of: “Do the pensions changes announced in the last Budget still stand given that they are not yet enshrined in legislation and Parliament is soon to be dissolved?

The short and unhelpful answer is: “It depends…”  But what exactly does it depend upon?

By way of a reminder the main pensions changes relate to a reduction in the money purchase annual allowance, a new tax charge on overseas transfers, and amendments to the tax treatment of foreign pensions.

As a start point it is helpful to consider the usual process following a Budget (but please note that this is only a summary).

  • Problem. Income and corporation tax can only be charged in a year for which a Finance Act provides that they may be charged. Given that the Budget was in March (i.e. towards the end of one tax year) and the Finance Act would not normally receive Royal Assent until the summer (i.e. after the start of the next tax year) the Government needs authority to collect taxes during the gap period (i.e. from the start of the tax year until the date of Royal Assent).
  • Solution. A series of ‘ways and means resolutions’, known as the Budget Resolutions, giving the Government the authority it needs are normally debated and passed shortly after the Budget. Once passed, Budget Resolutions have the force of an Act of Parliament but cease to have effect if the Finance Bill does not get a second reading in the House of Commons within 30 days of its publication, or if the Finance Bill does not get Royal Assent within seven months.

However, we now have a general election to throw into the equation. The Budget Resolutions will also cease to have effect on 3 May, the day Parliament is dissolved in anticipation of the election.

The current Finance Bill is the longest on record stretching to over 760 pages. Pensions may have escaped relatively lightly in this year’s Budget (for a change) but the Bill also contains a lot of complex legislation that fundamentally redefines some of the bases for taxation in the UK. With proper scrutiny of Finance Bills in recent years being a particular area of concern for both practitioners and the House of Lords Treasury Committee alike, one would hope that a Bill this weighty and important would not be rushed through in full.

What next?

A Finance Bill of some description will need to be passed before Parliament is dissolved. As a result, the current Bill is likely to be split into two (or possibly even three parts) with the first part being debated and passed very quickly to give the Government the necessary powers to continue to raise taxes and allow any other ‘uncontroversial’ provisions to become law without further debate. The Government is likely to include provisions in that first Bill that have already been the subject of public consultation and anything else the opposition parties allow. We do not yet know whether pensions provisions will form part of the legislation that is considered to be ‘uncontroversial’, and therefore enacted quickly under this ‘wash-up’ process, but the shortened (if at all) Bill is expected to complete all remaining stages of its passage through the House of Commons on a single day, next Tuesday, 25 April.

Depending on the result of the election, the excluded provisions (if any) will be represented to the House as a further Finance Bill post-election and will be debated in accordance with the more normal procedures. As a result of the election and summer recess, the timing of Royal Assent for that further Bill is unlikely before September 2017. To complicate things yet further, again entirely dependent on the result of the election, it is also possible that there could be an emergency, summer, Budget in late June or early July…

The good news is that the proposed move to an autumn Budget should reduce these types of complications in the future… assuming, of course, that proposal itself survives into the new Parliament.

Please contact your usual member of the pensions team if you need any help on what action your pension plan may need or wish to take in anticipation of the Budget changes.

Scottish court delivers Knight in shining armour to four pension plans

Ever heard the phrase “omnia praesumuntur rite esse acta”?  Me neither, until a Scottish court handed down its judgment in the case of Knight v Sedgwick Noble Lowndes.

It has been known for some time that the Scottish courts generally take a pragmatic approach to the construction of pension plan documentation. For example, in a 2010 case a Scottish court stressed that if the purported exercise of a pension plan’s amendment power is clear and put into written form, there is no need for the court to be unduly restrictive in considering whether the amendment power has been complied with. Contrast this with the approach of the English courts where, generally speaking, fairly robust evidence is required to establish compliance with the requirements of an amendment power.

The Knight case has brought this into focus again. The case concerned whether normal retirement ages had been validly equalised under four defined benefit pension plans before they subsequently transferred into another plan. The specific requirements of the amendment power under each pension plan were different but, generally speaking, amendments were to be evidenced by specified documents such as a written resolution/memorandum.  Extensive searches were undertaken in relation to each plan, but the evidence found did not “dot the i’s and cross the t’s” in relation to each amendment power.

The evidence found varied in each case but it included minutes of meetings and announcements to members, plus various other items of correspondence alluding to a decision to equalise benefits. The Scottish court relied on the maxim “omnia praesumuntur rite esse acta” (i.e. the presumption of regularity) in ruling that all four pension plans had been amended to equalise normal retirement ages from the dates on which this purportedly occurred.  In other words, the court was comfortable that there was a clear intention to equalise benefits based on contemporaneous evidence, despite the fact that key documents  relating to the exercise of the amendment powers had not been found.

Many have applauded this as a “common sense” approach from the Scottish courts. Whilst the “presumption of regularity” is a recognised maxim under English law, reported cases south of the border suggest that it has had only limited application in England to date in the pensions context. It could potentially be of assistance in a situation where there is a formal document in place but some evidence is missing as to its technical completion (such as due notice to directors of a board resolution, or proper delegation of the signatory to a resolution).  Whether it will be given greater weight in the future remains to be seen.

As ever, if you have any queries relating to this or you feel it has application to your pension plan, please contact us.

Do your pension plan rules marry-up with member expectations?

Do your pension plan rules marry-up with member expectations?

Since the Millennium it is fair to say the world has changed a great deal for defined benefit pension plans. Not least of the changes trustees have had to contend with are those in respect of survivors’ benefits. The majority of defined benefit pension plans make some provision for a pension to be paid to a surviving spouse on the member’s death and, given recent changes in legislation, it has been necessary for trustees to examine and amend survivors’ benefits for civil partners and same-sex spouses. The recent decision in the Brewster case represents another development in thinking as regards survivors’ benefits and trustees will be interested in its potential applicability to UK pension plans.

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The goalposts have been moved for DC pensions savings

The money purchase annual allowance (MPAA) affects individuals who have accessed their UK pension savings flexibly – it restricts further tax-free contributions they can make to defined contribution registered pension plans.

A change of tactics

The original MPAA introduced in 2015 was £10,000. Just two years later the Government’s response to its MPAA consultation, issued on 20 March 2017, has confirmed that the MPAA will be reduced by 60% to £4,000, with effect from 6 April 2017.

It is clear from the Government’s consultation response that the primary driver behind the change is to limit the extent to which pension savings can be recycled to take advantage of tax relief. However, the Government’s analysis shows that only 3% of over 55s pay more than £4,000 into a pension plan, so the number of people affected by the MPAA will be very small. We would query whether this change is adding unnecessary additional complexity into the already complex pensions regime, with little up-side.

Crucially, the goalposts have been moved for members who have already accessed their pension savings flexibly on the understanding that the MPAA would be £10,000. The Government has confirmed that there will be no transitional protection for these members because to apply different MPAAs, dependent upon when a benefit was last flexibly accessed, would be disproportionately complex, both operationally and in relation to disclosure requirements. However, we are already seeing some trustee boards facing communication challenges where members have accessed their pension benefits flexibly as a result of being notified of those flexibilities by the trustees.

It is also clear that the new MPAA introduces another round of administrative complexities and cost for pension plans as booklets, information and education documents/websites will have to be updated.  Members who have already accessed their benefits flexibly may not be aware of the MPAA change and trustees may want to consider notifying these members so they are not caught out by the reduction in the MPAA.

An own goal?

There is likely to be a rush before 6 April to use the £10,000 allowance by people who had not been considering such high contributions previously. This perhaps defeats the purpose of the legislation as this will cause a tax cost to the Government rather than a tax saving in the short term.

In the spirit of the game

Finally, we would query whether reducing the MPAA is sending the right message to savers. More people are retiring in a more flexible way, supplementing their reduced working with withdrawing their pension benefits. The new legislation will make it harder for members who wish to continue pension savings for the future, should the opportunity arise for them do so after they have accessed their pension savings flexibly. Is this fully in line with the spirit of “freedom and choice”?

As ever, if you need any advice on how this issue affects your pension plan, please contact us.

Pensions advice allowance – three is the magic number

Let’s start with the small print…

From April 2017 it will be possible for individuals to take regulated financial advice and to have up to £500 deducted from their defined contribution (DC) pension pot and paid over directly to a financial adviser. This is for regulated “retirement financial advice”, defined as “advice in respect of the person’s financial position, including their pension arrangements and the use of their pension funds”.

The pensions advice allowance (PAA) can be used by current and former members of any age, including those in receipt of a pension. An individual can use the PAA three times in their lifetime but not more than once in any tax year.  The PAA will be an authorised payment for tax purposes and the Government says that it will not affect an individual’s ability to take up to 25% of the remaining funds as a tax free cash lump sum when the benefits are taken.

The advice does not have to be provided on a face to face basis.

Which pension plans are affected?

The PAA can be taken from any DC pension pot – including from additional voluntary contribution arrangements. Many defined benefit plans offer a money purchase AVC facility, so this new legislation affects most pension plans. However, it will only be available if the pension plan rules allow it.

Employer-arranged advice

From April 2017 the Government is also increasing the income tax exemption around employer-arranged pension advice from £150 to £500 where an employer pays for or reimburses the cost of the advice. The scope of the advice that can be provided will be wider than before and there is nothing to stop this being used in conjunction with the PAA so that the member can benefit from £1,000 of tax advantaged advice.

Considerations for trustees

Trustees of pension plans with DC pots should consider whether they wish to offer the PAA to members, seek advice on whether rule amendments are required and consider whether they will place any restrictions on it. Trustees may, for example, choose to limit the choice to a specific firm of financial advisers and perhaps seek a fee reduction for members at the same time. Trustees should also guard against advice scams by unscrupulous “advisors”, where members could be encouraged to agree to their DC pots being charged whilst not actually receiving valuable advice. The Pensions Regulator is expected to release a factsheet in the near future confirming that trustees will not generally be liable for advice given by a third party.

Individuals using the PAA will be required to declare that they have not used the PAA more than three times in total but trustees are still expected to operate basic due diligence to prevent misuse. For example, if an individual uses the allowance more than three times in relation to the same pension plan, trustees should either not execute the withdrawal of money or report it to HMRC as an unauthorised payment. This means that trustees will need to keep records of members using the PAA.

Next steps

It is difficult to estimate how popular this option will be amongst members but we anticipate that financial advisers will publicise it as it is likely to generate business for them. Trustees should be prepared for questions in the short term and should add this issue to a forthcoming agenda for discussion. Please contact any of our pensions team for advice.  




Ctrl+Alt+Delete. Companies House reporting framework reset – trustee companies take note!

We blogged in March and June 2016 about the new requirements for UK limited companies (including trustee companies, whether limited by shares or guarantee) to identify “persons with significant control” (PSCs).  This requirement came in force on 6 April 2016.  It was coupled with a requirement to notify Companies House of any PSCs, alongside your confirmation statement (formerly known as the annual return), when your first confirmation statement is due after 30 June 2016.

Confirmation statements are normally due a year after you filed your last annual return, and they must be filed within 14 days of that date.  Trustee companies with confirmation statement due dates between now and the end of June should act now to identify their PSCs and put plans in place to ensure this filing requirement is complied with.  In the case of trustee companies supported by their employer’s in-house corporate team, this may simply be a case of them adding this to the rest of the confirmation statements that need to be submitted for the group.  This should, however, be confirmed with the employer.  In the case of employers who do not have such functions, or trustee companies limited by guarantee which are not part of the employer’s group structure, someone should be assigned specific responsibility for this task.  It is important to note that failure to maintain a PSC register or submit a confirmation statement on time could result in the trustee and/or trustee directors being liable to criminal sanctions and/or a fine.

If you would like to discuss how to identify the PSCs of your trustee company, or how to go about filing this information at Companies House, please get in touch with your usual Squire Patton Boggs contact.


New tax charge for overseas pension transfers

Trustees and pensions administrators should revise their transfer processes following an announcement in the UK Spring Budget designed to “tackle abuse of foreign pension schemes”.

What’s the issue?

In summary, where a member makes a formal request to transfer pension funds to an overseas pension plan the transfer will be an authorised payment provided that the overseas plan satisfies HMRC’s requirements – such pension plans are known as Qualifying Recognised Overseas Pension Schemes (QROPS). On and after 9 March 2017 transfers to a QROPS will be subject to a new tax charge of 25% unless an exemption applies.

The list of exemptions can be found in HMRC’s guidance and include circumstances such as: the member is resident in the same country as the QROPS receiving the transfer; the member is transferring to his employer’s occupational pension plan; the member resides in the EEA and the QROPS is in another EEA country.

Note that this is a new “special” tax for which the member and the trustees are jointly and severally liable. The trustees (or in reality, the pensions administrators on behalf of the trustees) should deduct the tax before making the transfer and pay it over to HMRC. This new tax should not to be confused with the charges that relate to unauthorised payments and associated scheme sanction charges – these still apply where the transfer is not to a QROPS.

Update transfer processes

In practical terms this means that trustees should ensure that their transfer processes are updated to reflect the new requirements, including:

  • Ensuring that sufficient information is gathered from the member to be able to check whether a tax charge should apply or whether the transfer falls under one of the exemptions. If the member does not provide the necessary information, then the tax charge must be applied.
  • Verifying that the overseas scheme is on HMRCs list of Recognised Overseas Pension Schemes within 24 hours of the transfer being made (more on this below).
  • Deducting the 25% tax charge where this is due and paying it to HMRC.
  • Providing to the member, the manager of the overseas plan, and HMRC details of the transfer and whether the overseas transfer charge applies. Taxable transfers also need to be reported on the Accounting for Tax Return.

Undertakings from overseas arrangements

In order to remain on HMRC’s list of Recognised Overseas Pension Schemes the manager of the QROPS must provide an undertaking to HMRC that the pension plan will operate the new overseas transfer charge and pay this to HMRC when due. Existing QROPS will be deemed to meet this qualifying requirement until 13 April 2017 – after this date if the required undertaking has not been provided the pension plan will automatically cease to be a QROPS on 14 April 2017. HMRC plans to suspend its list of Recognised Overseas Pension Schemes from 14 April and publish an updated list on 18 April.

It is worth noting that the tax charge can also apply to subsequent transfers from one QROPS to another but this is dependent on the member’s circumstances and it does not involve the UK pension plan once the original transfer has been discharged.

The truth, the whole truth, and nothing but the truth

There is always a possibility that members may be economical with the truth in an attempt to avoid a tax charge. Therefore, if trustees execute the transfer in good faith, having conducted the necessary due diligence, and it subsequently transpires that they have been misled into believing that no tax was payable, they can apply to HMRC to be discharged from their liability.

Trustees needing advice on how this affects their pension plan or help to assess the implications for any individual transfer should speak to one of the Squire Patton Boggs pension team.