If so, and your pension remains in the UK, you should be aware of your possible UK tax obligations. Furthermore, benefits could be available should you transfer these pension funds out of the UK to other secure jurisdictions under HMRC’s favourable Qualifying Recognised Overseas Pension Scheme (QROPS) regime.
From 6 April 2006 a single set of rules came into effect. Under this system, the tax treatment for all types of approved schemes, including occupational schemes, small self-administered schemes, personal pensions, self-invested pension plans and retirement annuity contracts have been amalgamated into the rules for Registered Pension Schemes. These can be either Defined Benefit or Defined Contribution (DC) Schemes.
From 6 April 2015, more flexibility was introduced in respect of how you can access UK DC savings. Generally 25% can be taken UK tax free and the remaining 75 % (whether income from an annuity, drawdown, or lump-sum) will be taxable at your marginal rate of UK tax (current top rate 45%).
UK residents are liable to UK tax on such income and, generally, non-UK residents are subject to UK income tax on UK source income too. Therefore, if you are non-UK resident and receive a payment from a UK Registered Pension Scheme, assuming the payment is not within your 25% tax free amount, it is liable to UK tax at your marginal rate, unless a Double Tax Agreement (DTA) with your country of residence and the UK provides exemption from UK tax on such income. Gibraltar has no DTA with the UK.
From 6 April 2015, the UK tax treatment of benefits from DC schemes on death depends, amongst other things, on the age of the member at the time of death (i.e. pre or post 75). From this date, generally, there should be a lower UK tax cost on passing pension value to heirs on death. However, that said there is still a possible current tax rate of up to 45%.
For those that are non-UK resident and have a QROPS the UK tax cost on succession can be less.
Gibraltar has no DTA with the UK, but does have a tax information exchange agreement.
The QROPS income payments to you would be taxable in Gibraltar, currently at a rate of 2.5%.
No UK income tax if non-UK resident (for 5 tax years + or total withdrawals are below £100,000).
No Gibraltar Inheritance Tax.
Protection from UK IHT.
Protection from UK death benefit charges, if non-UK resident (and non-UK resident for the last 5 years + before payment).
Malta has no DTA with Gibraltar but does have a tax information exchange agreement.
The QROPS income payments to you would be taxable in Malta at rates up to 35%.
No UK income tax if nonUK resident (for 5 tax years + or total withdrawals are below £100,000).
No Maltese Inheritance Tax.
Protection from UK IHT.
Protection from UK death benefit charges, if non-UK resident (and non-UK resident for the last 5 years +
Individuals are subject toGibraltar income tax on income accrued in or derived from Gibraltar. In the case of ordinarily resident individuals, certain foreign income is also taxable, including foreign pension income.
An individual is ordinarily resident in Gibraltar if they are present for at least 183 days in a tax year (1 July to 30 June), or at least 300 days in any 3 consecutive tax years. Presence is defined as any part of a 24 hour period commencing at midnight, whether or not any accommodation is used in Gibraltar.
Gibraltar also offers special tax residency status for certain individuals:
Gibraltar operates a dual tax system under which an individual is free to elect between an Allowance Based System (2014/15 top rate 40%) and a Gross Income Based System (2014/15 top rate 28%) whichever best suits their circumstances.
Generally, pension income from a statutory pension scheme, provident or other Gibraltar approved scheme received by a member aged 60 or over, forms part of assessable income, but is taxed at the rate of 0% (age 55 for police or firemen if compulsorily retired).
Gibraltar has introduced a tax law for imported pensions (i.e. specifically for a QROPS). This treats income from a Gibraltar approved pension scheme with imported pension rights (i.e. from the UK) as assessable income and taxes it at a low rate of 2.5%. This applies equally to ordinarily residents, Category 2 residents, HEPSS and non-residents.
Gibraltar social security pensions, or equivalent pensions from a member state of the European Union (e.g. UK State pension), are exempt from Gibraltar tax.
Net wealth, gift, inheritance, estate, and capital gains taxes are not imposed in Gibraltar.
Leave the Pension in the UK
If the pension remains in the UK, UK tax would be due on the payments (at up to 45%) with tax payable in Gibraltar if ordinarily resident. A foreign tax credit should be available in Gibraltar to alleviate any double taxation. Furthermore, the fund remains exposed to the UK death benefit charges.
Transfer to a Gibraltar QROPS
Transferring to a Gibraltar QROPS for non-UK residents can alleviate UK income tax on payments (at up to 45%) with 2.5% Gibraltar tax on payments. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Gibraltar IHT.
Transfer to a Malta QROPS
Transferring to a Malta QROPS for non-UK residents can alleviate UK income tax on payments (at up to 45%) with 35% Malta tax on payments and tax in Gibraltar if ordinarily resident. A foreign credit should be available in Malta to alleviate any double taxation. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Maltese IHT.
This general information has been provided on the basis of our understanding of the current legislation in the UK, Gibraltar & Malta as of April 2015. Should any of the information provided be inaccurate, incomplete or misleading, we take no responsibility for any reliance placed on it. We recommend that individuals always seek specialist multi-jurisdictional (where relevant) tax advice so that their individual circumstances can be fully considered.