Also in the news...
Strategic Locations For Business Travellers In London
London, a bustling hub of commerce and culture, is an essential destination for business travellers. Whether attending meetings, conferences, or networking events, the city's diverse neighbourhoods offer various amenities to suit the needs of the professional on the move. From convenient transport links to luxurious accommodations, knowing where to base yourself can significantly enhance your business trip experience.
Business Expansion in the UAE: Mastering the Free Zone Advantage
The UAE has become the number one destination for international business activity. More precisely, free zones have been wooing investors from every nook and corner of the globe by offering unbeatable incentives, most notably complete foreign ownership and tax exemption.
Ukraine business guide: helping UK businesses trade with Ukraine
This guide provides UK businesses the core information necessary to understand the challenges and opportunities of trading in Ukraine.
Trade with Canada Guidance
How you import from and export to Canada.
Guidance Living in France
Information for British citizens moving to or living in France, including guidance on residency, healthcare and driving.
QROPS: US treatment on transfers from UK pensions
Individuals who participate in UK pension schemes, particularly those who leave the UK, may consider transferring their UK pension funds overseas into a QROPS (Qualifying Overseas Pension Scheme).
This tax-free transfer for UK purposes may offer a couple of advantages, such as potentially avoiding a 55% UK income tax charge on death. /p>
What happens when the individual is a US taxpayer?
An increasing number of individuals and their financial advisors are facing this question. Before we look to the US tax answer, here are a few ground rules:
- The US taxes residents on worldwide income under US rules
- Non-US pension schemes won’t be US qualifying pensions
- Special US rules apply to foreign employer plans
- Personal pensions are often structured as trusts and therefore may be subject to additional foreign trust reporting. These will be transparent so we must look at underlying investments
- Certain tax treaties (such as the UK/US treaty) provide some protection from US tax, either for contributions or internal growth
The UK treaty stipulates that the growth in value in a UK pension is US tax deferred until distributions start. This relief continues even if funds are transferred between UK pension plans.
Is a transfer to a QROP a tax recognition event for US tax purposes?
The short answer is yes. The UK/US treaty provides relief for transfers between UK plans; the US Treasury Explanation to the treaty defines a UK plan as a UK resident plan. As a QROP is not UK resident, the transfer is a tax recognition event.
Is the growth in the QROP currently US taxable?
Generally it will be, but again treaties may help – for example, the Malta/US treaty appears to defer recognition of growth within Maltese QROP plans. However, most QROP locations don’t have that benefit, although it may still be possible to use annuity-like investments to obtain similar deferral.
Are there other benefits?
There may also be UK benefits in transferring a UK pension fund into a QROP but there are administration costs involved.
Any US taxpayer considering such a transfer should consult the F&L Expatriate Tax team to discuss their specific circumstances.