By James Bryce
GIBRALTAR is being forced to change its income tax legislation after being accused by the taxman of flouting the rules.
The amendment is being pushed through parliament to allow the Rock to begin offering overseas pensions again, following a three-year gap.
The government put a stop to its Qualifying Recognised Overseas Pension Scheme (QROPS) after HM Revenue & Customs took issue with its policy of taxing residents over 60 at zero per cent.
When the new legislation is passed, Gibraltar will allow benefits paid by pension funds transferred to the Rock and administered there to be taxed at 2.5 per cent.
The law will also allow for a maximum tax-free lump sum withdrawal of 30 per cent and a minimum retirement age of 55, although existing schemes will be unaffected.
Steven Knight, the chairman of the Gibraltar Association of Pension Fund Administrators, said: “Generally, HMRC is keen to ensure aggressive tax planning, in this case using QROPS legislation, is not used in a way that was not anticipated which could result in either a reduction in current taxes to the Treasury or future additional costs being incurred.
“There have been a number of arrangements marketed which aim to release capital placed in pension schemes which were intended to fund long-term pension payments.”
Under QROPS rules, those leaving the UK on a permanent basis can transfer their pensions to an overseas scheme and retain their UK tax benefits after a holding period of five years.
But the new scheme must demonstrate that at least 70 per cent of the fund will be used to provide a pension for retirement.