Worried about getting hit with the Overseas Transfer Charge on transfers to QROPS if you return to the UK after Brexit?

This article does not represent tax advice. We recommend that you seek tax advice from a specialist tax adviser to understand your own, personal, tax position. This information is based upon our interpretation and understanding of current (22.10.2020) HMRC tax guidance on Pensions.

On the 9th March 2017 HMRC brought in a new rule which applied a 25% tax charge (Overseas Transfer Charge – OTC) on particular transfers that were made from UK pensions to QROPS (Qualifying Recognised Overseas Pension Schemes).


The Overseas Transfer Charge is not applied if:

    • the member is resident in the same country in which the QROPS receiving the transfer is established
    • the member is resident in a country within the European Economic Area (EEA) and the QROPS is established in a country within the EEA


However, if the member should decide to relocate to another country, away from that in which the QROPS is based, or should decide to move to a country outside of the EEA, that member is then taxed 25% against the value of the initial transfer made.


The question, quite naturally, arises then as to what will happen after Brexit when the UK is no longer part of the EEA. Will those who have transferred to QROPS, and have returned to the UK within 5 years be liable for the OTC now that the UK is no longer part of the EEA? Or indeed, what about those members who have transferred to QROPS (due to the significant LTA tax planning benefits that QROPS sustain) whilst have been (and continue to be) resident in the UK? Will they now, all of a sudden, be hit with a 25% tax bill on their initial transfer?


You’ll be pleased to learn that in our opinion, no, they will not. The reason for this is that the tax guidance from the HMRC has been updated to make a clear, Brexit proof, delineation between UK, EEA and Gibraltar. That is, specific direction is given to the effect that if you arrange a transfer to an EEA based scheme and you move out of an EEA member state, Gibraltar OR the UK then you will be liable for the Overseas Transfer Charge – if you stay put in the EEA or UK, you’ll not be liable for the OTC. The ‘OR the UK’ being the important, recent, addition.


What’s more, if you do arrange a transfer to QROPS whilst you are resident outside of the country that the QROPS is based, or an EEA member state, you can get the 25% tax that was deducted, refunded back to you upon return to the UK or an EEA country. To claim, you need to tell your UK scheme’s administrator and your overseas scheme manager you’ve moved using form APSS 241. They’ll put the tax refund back into the pension it was taken from.


What this means is that if anyone within or without the UK is considering transferring to QROPS, they need not be concerned with the OTC applying to their transfer upon return to the UK within five years or remaining in the UK with QROPS after Brexit.


Will transfers to a QROPS continue to be possible without any tax charges applied after Brexit? That’s a question which cannot be answered now. Thus if you’re considering transferring to a QROPS you’d probably be wise to get it done before Brexit as you could quite well end up getting taxed on transfers to QROPS in a post Brexit world.


Russell Hammond FPFS FCSI

Chartered Fellow Financial Planner & Chartered Fellow Investment Adviser


If you’d like to understand your QROPS transfer options further, we’d be delighted to help you to understand your options. Contact us today for a fee free initial meeting. 


About AES Adviser

AES Adviser advises expatriate clients worldwide on all financial planning matters including wealth management, estate planning, offshore bank accounts, savings and investment, insurance, multi-generational wealth transfer and generating income, from wealth accumulated, to support retirement.