The changes are to determine how funds benefiting from UK tax relief are calculated and how the amount subject to UK tax charges is reduced.

These changes are necessary following introduction of the overseas transfer charge from 9 March 2017 and revised member payment provisions from 6 April 2017.

The draft regulations are about calculating the new ‘ring-fenced transfer fund’ and the new ‘ring-fenced taxable asset transfer fund’ and the rules determining the order in which the reductions are made.

The legislation makes new provision for calculating funds that are transferred on or after 9 March 2017. These funds (ring-fenced transfer funds) are computed separately as they are subject to the new overseas transfer charge.

Where the transfer was made on or after 6 April 2017, payments out of those funds are subject to UK taxing provisions for five years immediately after transfer and for 10 full tax years after the individual becomes resident outside the UK.

The legislation also makes provision for calculating the ring-fenced taxable asset transfer fund which determines how much of the funds is subject to the UK taxing provisions where the investments of a small scheme can be directed by the member.

In addition, it expands the circumstances in which an individual’s fund in a foreign pension scheme that has benefited from UK tax relief can be reduced by events other than payments, such as setting aside funds to be paid as a drawdown pension.

The deadline for comments is 15 December.

Draft legislation: the Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) (Amendment) Regulations 2018 is here.

Report by Pat Sweet