QNUPS Explained

A QNUPS is a Qualified Non-UK Pension Scheme which was introduced by HMRC in February 2010 and is a regulated tax efficient pension scheme which allows investment of wealth overseas.

Although a QNUPS is a pension fund it does have a degree of flexibility and has some significant tax advantages. Anyone is eligible to invest in a QNUPS unless the country where you are resident specifically excludes this.

Features of QNUPS

• Potential tax free asset growth (minimising exposure potential IHT and capital gains taxes in the UK)
• QNUPS is available as an option in several countries and not only in countries that have Double Taxation Agreements with the United Kingdom
• Tax efficient – QNUPS can potentially minimise exposure to UK IHT and may also be able to minimise local wealth taxes
• No maximum age limit to take a QNUPS
• Contributions can be for income derived other than from employment
• Growth is free from Capital Gains Tax (CGT). This means that the capital growth of your asset will be passed on to your named beneficiary
• The costs associated with taking a QNUPS can be reasonable, often include a onetime setup fee - however specific costs will depend on an individual's circumstances
• There is no minimum value to take a QNUPS; however, QNUPS providers might recommend a minimum amount. There may also be alternative investment vehicles which offer better protections against tax - again it will depend on an individual's personal circumstances.
• May hold assets such as property, arts, antiques, fine wines and investments
• You can decide who will inherit assets and funds by designating beneficiaries

QNUPS minimise potential UK Inheritance Tax

QNUPS was introduced in February 2010 by the UK government by a set of rules that confirmed that certain offshore pension schemes would not be subject to the UK’s Inheritance Tax. By taking a QNUPS an individual can shelter his/her assets in an offshore pension scheme. QNUPS may provide a legal way of minimising your inheritance tax bill.

However, if HMRC were to suspect that a QNUPS was being abused for tax avoidance purposes, they may investigate.

Availability

One of the other QNUPS benefits is that it does not only have to be located in countries that have signed the Double Taxation Agreement with the United Kingdom. This is very advantageous as it has two significant issues. Firstly, since it does not have to be located in country with a DTA, there needs to be no reporting requirements. So a QNUPS does not have to be reported to HMRC. Secondly, QNUPS can be hosted is several other countries thereby giving you wider choice.

No Maximum Limit

With a QNUPS, there is no maximum limit on how much can be transferred. Other offshore pension schemes might have a limit, but with a QNUPS, you can decide how much you want to invest.

No Maximum Age for Contributions

Unlike other overseas pension schemes, there is no maximum age limit to contribute to a QNUPS. You can contribute for as long as you like.

Tax Efficient

QNUPS are tax efficient. The most important part of taking a QNUPS is that your assets including capital gains are passed on to your named beneficiaries without any tax cuts. In other overseas pension schemes as much as 40% could be charged as tax, but with QNUPS you may be able to effectively eliminate those charges.

Contributions

Unlike UK based pensions, the contributions into a QNUPS are unlimited and can be made from a variety of sources. Contributions to a QNUPS need not only be made from income earned but from assets acquired by you in any way. Assets do not have to be liquidated prior to taking a QNUPS. Residential property, antiques and even fine vintage wines are accepted.

No Capital Gains Tax

Assets held inside a QNUPS would not be taxed on any capital gains. The full capital growth of your assets will be passed on to any beneficiaries.

Available for UK residents and non-UK residents

Even if you are considered a UK resident, you may still be able to set a QNUPS even though it is offshore.

Request advice before making any decisions

While a QNUPS could help you legally avoid UK inheritance tax, even if you are a UK resident, you must always seek both tax and independent financial advice before making a decision. The initial purpose of QNUPS was not to avoid taxes in the UK and therefore they should not be considered a silver bullet when it comes to reducing your tax.

Always seek independent advice from specialists who understand the complexities and will be able to advise you of the risks and benefits of alternative tax efficient investment options.

Experts for Expats have built a network of trusted independent wealth managers and financial advisors who can assist UK residents and British nationals living abroad. Our free introduction service will connect you with one of our trusted partners who will be able to discuss your situation and provide general guidance and formal advice if you chose to engage them on a formal basis.

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