The Triple Solution?
High net worth clients have felt very aggrieved over the past few years with the restrictions placed on pension schemes, the tightening of the tax rules on investing in residential properties and the inheritance tax burden potentially leaving a reduced estate for their loved ones upon leaving this mortal coil.
One of the ProActivTax specialists has a solution which could tick the boxes on the pension, IHT and investment front for perhaps a few of those clients.
A QNUPS is a Qualifying Non UK Pension Scheme. The trustees are outside the UK typically in the Isle of Man. I would argue probably less of a pension scheme but more like a discretionary trust.
QNUPS v SIPP/SSAS
Here is just a brief synopsis comparative between a QNUPS as opposed to a SIPP/SSAS.
There is no tax relief on contributions going into a QNUP whilst, subject to certain limits, there is going into a SIPP/SSAS.
Certainly UK sourced income within a QNUPS would be liable to tax usually at the Trust rates (although a company structure within the QNUPS could be used) as opposed to a SIPP/SSAS where the income would be tax free.
There is no capital gains tax liability for either setup.
Tax free lump sums from the age of 55 are available from both.
In a SIPP/SSAS there are a number of investment restrictions, the main one being in respect of residential property. You don’t have those investment restrictions within a QNUPS.
There are quite strict borrowing restrictions within SIPP/SSAS, up to 50% of the net asset value of the scheme. With regard to a QNUPS the only borrowing restriction is usually the limit up to which a bank is prepared to lend.
QNUPS can make loans to individuals on more flexible terms than a SIPP/SSAS. Both SSASs and SIPPs can make loans to unconnected third parties, and in addition a SSAS can make loans to a connected employer company. However loans must not be made, either directly or indirectly, to scheme members or their relatives or other “connected parties”.
The amounts going into a SIPP/SSAS are restricted broadly to the annual allowance limit of £40,000, or £10,000 if the client’s adjusted income is £210,000 or more, or even £4,000 if the individual has flexibly accessed his pension scheme in the past. Plus there is the lifetime allowance limit of just over £1million to also consider. With a QNUPS there is no limit to the amount going into the scheme or the value of it. Also, if the person has a QNUPS the amount contributed to it and its value does not impact on any UK registered pension scheme he/she may have running alongside it.
Both in respect of the QNUPS and a SIPP/SSAS, the value of the scheme is outside the person’s estate for IHT purposes.
A QNUPS might therefore be suitable for those people in reasonable health under the age of 75 who are over or close to the lifetime allowance limit, who want greater investment flexibility and who perhaps want to build a property portfolio through a QNUPS.
It won’t be right for everybody but for some it might be the triple solution for pension, IHT and investment purposes.
ProActivTax help accountants across the UK
ProActivTax was set up to help accountants around the UK to develop their tax offering to their existing client base and to build up their tax profile within their local community and beyond.
All ProActivTax members have access to our tax specialists who cover the full range of taxes within the safe confines of the tax legislation, one of whom provides tax advice in respect of QNUPS.
We also do this through tax resources (such as PAT Potentials), tax marketing, tax specialists, tax training/webinars/seminar programmes and us.
If you would like to find out more please click here to access my online diary or simply drop me an email with some provisional dates and I’ll set up a conference call.
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