Guernsey’s worst fears were confirmed last week when HMRC delisted more than 300 of the Island’s QROPS, leaving only 3 approved schemes on the official list.
The Island is particularly aggrieved that it seems to have been singled out for attention, as many of the other offshore jurisdictions which also offered QROPS to non-residents (third country QROPS), such as the Isle of Man and Jersey, have come through the recent rule changes with the majority of their schemes intact.
Fiona Le Poidevin, Deputy Chief Executive of Guernsey Finance, the promotional agency for the Island’s finance industry, was at a loss to explain why Guernsey seems to have been singled out by HMRC. She said:
“HMRC’s amendments to its legislation contained in the UK Budget were clearly focused on targeting abuses in the system and Guernsey has always upheld itself as a model of compliance with the QROPS regulations. The other major change within the new regulations was that schemes must treat residents and non-residents alike in respect of tax treatment and Guernsey took quick and decisive steps to introduce a new category of pension scheme, known as s157E, which, by extending the tax exemption on pension benefits to Guernsey residents, was designed to meet the revised criteria for a QROPS.
“Therefore, it is confusing and frustrating that HMRC has now delisted almost all Guernsey schemes while most of those from other jurisdictions remain listed as QROPS. We accept that HMRC has the right to make its own rules regarding the treatment of UK tax relieved schemes but it needs to be an open and fair process. However, the current actions have been introduced without warning, lack transparency and appear discriminatory. Indeed, HMRC seems to have set aside its own rules to meet an unpublished policy objective.
“The whole situation is made even more puzzling by the fact that HMRC’s original consultation document admitted that the changes would have a ‘negligible impact on receipts’ to the UK exchequer.”
The fact that HMRC has chosen to take action despite an apparent belief on its part that it will not raise much, if any, revenue for the exchequer has echoes of the recent removal of the Low Value Consignment Relief for Channel Islands imports to the UK. This was another clear example where the UK government appears to have taken a politically motivated decision to be seen to clamp down on “tax havens” even where there is likely to be no palpable benefit to HMRC or the UK economy as a consequence. This trend should be a worry for all offshore jurisdictions, which in the past have been able to rely on hard facts (such as those in the Edwards Report) to defend their position and illustrate the indirect benefits they bring to the UK economy. The difficulty for these small territories is that there is at present a strong anti-globalisation, anti-capitalist lobby which has been successful in building something of a wave of antipathy towards the offshore industry. The offshore jurisdictions feel very aggrieved that the level of debate is often fairly fatuous and ill-informed, but nevertheless the politicians (and probably above all a Tory led coalition government) are terrified of appearing to pander to rich and powerful businesses at a time of austerity and therefore find it easy to win brownie point by closing down apparent “loopholes” even when there is no economic sense in doing so.
Indeed, the Guernsey representatives are arguing that if HMRC does not change its stance, then the likely impact is that business will move to more remote jurisdictions and as a consequence, the monies from QROPS in the Island which currently flow back into the City of London may also be lost.
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