Is it really time up for QNUPS?

Andy Wood • August 5, 2024
Mosaic Chambers Group

Is it really time up for QNUPS?


Last week I saw an article suggesting that QNUPs are being sold as tax avoidance vehicles. 


This is a surprise as, firstly, I don’t come across many people talking about QNUPS at all. But then, I am just me, and perhaps they’re doing it secretly behind my back,


Secondly, unless one can demonstrate that it is set up for genuine pension provision, then any ‘favourable’ tax analysis fails like a pack of cards.


Finally, a QNUPS is not a free for all. It must broadly mirror the same rules regarding the drawing of benefits (and the taxation of those benefits) as those for registered pension schemes. As such, like any other pension arrangement, at some point one must take benefits and the majority, like a registered scheme, must be taken as income. Assuming you are Uk resident at the time, then this is taxable when received. 


This means that, at best, one is probably only deferring tax. At worst, one might be embarking on the worst course of action possible from a tax point of view.


As such, the devil is not so much in the detail, but in the exit plan…


The legislation


First things first, a Qualifying Non-UK Pension Scheme (QNUPS) is not really a specific product. It is merely a tax status.


This particular status comes, in the first instance, from Inheritance Tax (“IHT”) code.


That said, the statutory provision acts as little more than a signpost to key statutory instruments. It is this secondary legislation that adds meat to the statutory bones.


But what is a QNUPS?


In short, a QNUPS is a type of international pension scheme.


However, it is an international pension scheme that doffs its cap to the UK pension system enough for HMRC to ‘recognise’ it. 

Note, this is not the same as a pension scheme being registered.


However, the scheme and jurisdiction in which it is based must satisfy a number of requirements. Those are outside of the scope of this article - but means that the scheme must broadly be run on the same basis as a UK scheme in terms of the form and timing of benefits.


What a QNUPS is not


For the acronym-ically challenged, a QNUPS is not a QROPS!


The detailed differences between these two types of scheme are beyond the scope of this article (again!).


A QROPS scheme will be almost identical to a QNUPS. However, those operating the QROPS will also have agreed to certain reporting obligations with HMRC. 


As a result, a QROPS is a vehicle which can potentially receive the contents of a tax relieved UK registered pension pot without a tax charge (subject to the relatively new Overseas Transfer Charge). 


A QNUPS that does not satisfy the QROPS conditions cannot.


So, QNUPS usually only take fresh new contributions of cash or assets and not transfers from existing schemes.


Contributions to a QNUPS


It is worth pausing to mention that, for the purposes of this article, I will reflect on the tax implications of an individual making contributions to a QNUPS and not those made by an employer.


Firstly, there is unlikely to be any income tax relief available on a contribution to the scheme. 


However, the corollary of this is that the contribution is outside of an individual’s Annual Allowance. 


As such, a QNUPS is sometimes a useful ‘top hat’ pension scheme. In other words, where the maximum tax relief has been mopped up for a particular year, additional contributions could be made to a QNUPS without penalty (but no relief either). 


Further, in my experience, entrepreneurial clients might consider the loss of (these days much reduced) tax relief on contributions to a registered pension scheme a price worth paying so that they have access to a greater range of investments under a QNUPS. 


For example, a QNUPs, if the trustees agree, can invest in UK residential property without suffering a penal tax charge.


Assuming that any contribution is in cash, then there should not be any capital gains tax (“CGT”) or Stamp DutyLand Tax (“SDLT”) implications. One needs to take more care where one is contemplating the contribution of an asset to the QNUPS. This might, for instance, trigger a taxable gain or, for UK real estate, an SDLT liability. 


On the basis that the contribution is being made to secure genuine retirement benefits, there should not be any IHT consequences of the contribution.


However, where it cannot be justified (say, by an actuary or similar) then the IHT position is likely to be a whole lot more precarious. Most providers, in my experience, will require such an exercise to be undertaken before setting one up.



Ongoing tax position


CGT


The QNUPS, as an Overseas Pension Scheme, will have a statutory exemption from CGT in much the same manner as a UK registered pension scheme.

 

This means, like a registered pension scheme, a QNUPS is outside of the Non-Resident CGT rules which will apply to almost all other vehicles that are making investments in UK real estate.


Income tax


Generally speaking, any UK source income directly received by the trustees will be subject to UK tax.


Where this is a trust-based arrangement then the Rate Applicable to Trusts (“RAT”) would result in any income being taxed at the highest rates. 


Non-UK income should be outside the scope of UK income tax subject to dealing with complex (personal tax) anti-avoidance rules in this area.


Again, if it can be demonstrated that the QNUPs is established to provide genuine retirement benefits then these might be managed.


But such an ‘exemption’ would need to be claimed so this needs to be dealt with properly at the outset. 


IHT


As mentioned above, the actual QNUPS definition is taken from the IHT code.


Essentially, any value comprised in a QNUPS will be outside the scope of an individual’s estate. As such, it provides an efficient tax wrapper for IHT purposes.


Further, the 10-year charge that applies to most trust arrangements does not apply to a QNUPS.


But, again,  this isn’t really any different to a registered pension scheme.


Exit


One observation I have made over the years is the need for there to be a clear plan on taking benefits from the scheme and / or what might happen to the funds following the death of the member.


In relation to the first of these ‘exit’ issues, it is likely that when benefits are paid then, where the member is UK resident, those benefits will be subject to income tax.


For someone who sets up a QNUPS close to taking benefits then they might have committed the cardinal tax sin of turning capital in to income. A reverse alchemy. 


Where the member is non-UK resident, then it is likely they can draw benefits free of UK income tax. However, they need to make sure of their position in their country of residence to ensure they haven’t jumped out of the frying pan in to the fire!


It should be noted that a capital sum could be taken from the scheme as a tax-free cash which would form part of the usual 25% limit.


Finally, any ‘exit’ plan should also remain fluid. There are few guarantees in tax other than the fact that the law will most likely be different in a few decades time.


Conclusion


A QNUPS is not a magic tax bucket and is not a silver bullet to solve all a client’s needs.


Used properly, they are not a tax avoidance vehicle.


Used as a tax avoidance vehicle, rather than a genuine pension, then one might find the tax analysis comes crashing down around your ears.


BREAKING NEWS: UAE Offers Corporate Tax Penalty Relief – But You Must Act Fast to Qualify

By Amie Roberts • May 1, 2025
If you’ve missed your Corporate Tax registration deadline or already paid the AED 10,000 fine, there’s now a golden opportunity to waive or reclaim that penalty — but only if you act quickly. In a recent move to support businesses during the first year of the UAE’s Corporate Tax rollout, the Federal Tax Authority (FTA) has announced a limited-time grace period. The initiative allows eligible businesses to apply for a full penalty waiver if they file their Corporate Tax return early. This is a major relief for thousands of companies who have either: Missed their Corporate Tax registration deadline, or Registered late and were hit with the AED 10,000 fine Why is this happening? According to Gulf News, this initiative is part of a broader effort by the Ministry of Finance and the FTA to ease the transition into the new Corporate Tax system and promote long-term compliance. What You Need to Know: Deadline for the waiver: July 31, 2025 BUT: You must file your return well ahead of your official tax deadline to qualify. Don’t wait – gathering your financial records and preparing your tax return can take time. For most businesses operating on a calendar year basis (Jan–Dec), that means filing within the next couple of months. Who qualifies for the penalty waiver? If you’re asking: “Can I get a refund on my Corporate Tax late registration fine in the UAE?” “Is it possible to waive the AED 10,000 Corporate Tax penalty?” “How do I apply for the UAE Corporate Tax penalty relief?” Then the answer is – yes, you may be eligible. But there’s a catch: you must file your tax return early, ahead of your normal deadline. This is not automatic, and if you miss the window, the fine will not be waived or refunded. Why early filing matters: The FTA has made it clear: early compliance is the only route to relief. This means: Completing your Corporate Tax registration (if not already done) Preparing your financials for your first tax year Submitting your Corporate Tax return well before the deadline This one-time waiver won’t be repeated – so don’t leave it until the last minute. How Mosaic Chambers Group can help: At Mosaic Chambers Group, our FTA-certified tax advisors and legal consultants are ready to guide you through the entire process. Whether you need help: Understanding your eligibility Filing your Corporate Tax return early Claiming your AED 10,000 fine refund Or ensuring future tax compliance We’re here to take the stress out of Corporate Tax. Book a free consultation today and get expert support from our team. Click here to get in touch or below to book your call.

End of the Non-Dom Era: Labour’s Tax Reform Triggers Wealth Flight

April 15, 2025
April 6th, 2025 marks the beginning of a major shift in UK taxation. Labour’s new tax reforms have officially scrapped the long-standing non-domiciled (non-dom) tax status — a move that targets wealthy individuals who live in the UK but, under the new non dom regime, have been able to mitigate UK tax on their overseas income and gains. This change spells the end of a tax break that attracted many high-net-worth individuals (HNWIs) to the UK and is already causing ripples across the country’s elite financial circles. The message is clear: if you live here, you pay here. Let's break down what has changed. What Was the Non-Dom Tax Regime? The non-dom tax regime allowed individuals residing in the UK, who claimed their primary home (domicile) to be outside the UK, to avoid UK income and capital gains taxes by not bringing any foreign earnings or gains back into the UK. This system made the UK an attractive location for individuals with international earnings. We covered this in more detail here. What Has Changed? Since 2025-26 tax year, the government has implemented several significant reforms. These reforms include: 1. End of Non-Dom Status All UK tax residents will now owe UK income tax on all global income and gains, regardless of whether these were brought into the country or not. 2. Inheritance Tax (IHT) on Foreign Assets Non-doms could previously avoid UK Inheritance Tax on assets they held outside the UK; now individuals who have lived here for more than four years will be liable for IHT on all their global estate assets. 3. Temporary Reliefs To assist the transition, temporary measures include the following: Tax Year 2025-26 will see a 50% reduction on foreign income tax. Capital Gains Tax (CGT) laws allow us to rebase overseas assets based on their value as of April 2019 for CGT purposes. Temporarily, bringing money from abroad may not incur full tax charges upon entering the UK. Why Has the Government Made These Changes? According to Labour, eliminating non-dom status will provide many advantages: Enhance tax fairness Raise extra funds to support public services Close longstanding loopholes used by the wealthy Rising Tax Bills HNWIs with overseas assets and income will now face significantly increased tax obligations that may have an effect on personal finances, family planning and wealth transference. Making Decisions About Moving Abroad Some individuals are already leaving the UK in order to settle in countries with more advantageous tax regimes. Some common destinations for relocation include: United Arab Emirates (UAE) does not levy income or capital gains tax Switzerland provides fixed annual tax arrangements for its most wealthy citizens Italy - flat tax of EUR100,000.000 on foreign income for new residents Monaco does not levy personal income tax for residents Concerns Raised About Impact Within Industry Concerns are being expressed that this could lead to a decrease in: Investment into UK businesses Jobs funded by private wealth Donations to UK Charities What About Entrepreneurs? Many entrepreneurs utilise non-dom status to reduce tax on international business earnings, however, these changes could require: Establishing headquarters or structures outside the UK Reconsider ownership of intellectual property or company shares An investigation of how profits and dividends are managed is important to ensure long-term growth. What Should Be Done Now? If you or those you work with have been affected, taking immediate steps is key to their safety. Here are a few things you can do. 1. Consult With A Specialist Tax Advisor Every situation varies. Seek tailored guidance from someone familiar with both UK and international tax regulations. 2. Evaluate Your Financial Structures Evaluate how you hold assets - for instance through offshore companies or trusts. Any necessary changes must be implemented for optimal efficiency and compliance purposes. 3. Consider Relocating If the UK's new tax rules no longer suit, you might wish to explore living elsewhere where tax liabilities would be lower. Be sure to carefully consider all legal, financial, and family aspects prior to making any decisions. Summary The changes to the non-dom tax regime mark a profound transformation for those who rely on global income and wealth for tax payments, especially those living abroad. Although intended to increase fairness, these reforms also pose challenges to those accustomed to using it. Now is the time to review your plans, secure your assets, and seek professional guidance. How Can We Assist? At our offices in both the UK and UAE, we assist individuals, entrepreneurs and professional advisors in making well-informed decisions. If you have any queries about this article or need advice then get in touch.
More Posts