UK expatriates may still be considered as UK domiciled and therefore will still be liable for the 40% inheritance tax on their worldwide estate after allowances. This is due to the concept of ‘deemed domicile’ which applies for inheritance tax purposes and means that even if you are not domiciled in the UK you might still be deemed domiciled if you were domiciled in the UK within the three years immediately before the transfer, or if you were resident in the UK in at least 17 of the 20 income tax years of assessment ending with the year in which you make a transfer.
HMRC are however clamping down on QROPS which now have to be registered with the HMRC before it can benefit from any tax breaks so many British expats are turning to QNUPS which do not have to be registered with HMRC.
Some benefits to the setting up a QNUPS are;
– You are able to invest more regularly and there are no limits on contributions
– You can also put a large range of assets into a QNUPS including your home
– QNUPS can make loans to its members to purchase personal assets
– Pensions are subject to 55% inheritance tax before being paid out whereas these schemes are exempt from inheritance tax
– If returning to the UK the underlying income and capital gains will be exempt from UK tax
QNUPS does not have tax relief which are available to normal UK-approved pensions. However, as this is now capped at £55,000 per year a more sensible idea is to transfer £55,000 into an approved scheme before tax has been deducted and then transfer any income that has already been taxed into a QNUPS .
It is important to note all the benefits as if the sole purpose for setting it up is the avoidance of UK inheritance tax then this could be attacked by the HMRC, professional advice should be obtained to ensure that it does meet the conditions and take advantage of the various benefits so this does not happen.