HOW TO ESTABLISH A QNUPS:
If you want to establish a QNUPS - Please let us know:
You’ll get our amazing FREE guide “How to use a SSAS and other Planning Tools to Save Tax” – which will include sections on how it is possible to use a SSAS to invest into ‘Residential Property’ and even mitigate the ‘Lifetime Limit’ and SSAS borrowing restrictions. All using well established additional Planning Tools which we offer to all our SSAS Clients.
As an added bonus, you’ll get a FREE phone consultation – which will let you ask our tax expert all your questions before you embark upon establishing a SSAS, QNUPS or EPUT.
INTRODUCTION: WHAT IS A QNUPS?
A Qualifying Non-UK Pension Scheme (QNUPS) is a type of offshore pension that ‘Qualifies’ under HMRC rules for a number of tax benefits. Many people confuse them with a QROPS (Qualifying Recognised Offshore Pension Schemes). They are different – in that the QROPS is ‘recognised’ by HMRC as one that is able to receive transfers from other ‘approved’ pensions (such as ex-employer’s schemes, SIPPS and SSAS’s).
Approved pensions allow contributions that receive tax relief on the way into the scheme, but there are limits on the size of pension that can be accrued – this Lifetime Limit is currently £1.07m (2020). This Limit increases each year in line with inflation. When an approved pension is transferred into a QROPS, there is a calculation carried out to assess how much of this ‘Lifetime Limit’ has been used up. This is called a ‘Crystallisation’ event. The Lifetime Limit does not apply to a QNUPS as it does not receive transfers from approved pension schemes that have received tax relief.
A QNUPS is used for making contributions where no tax relief is given on the contributions – but there are still major tax benefits associated with using a QNUPS to shelter investments from capital gains tax, income tax and of course inheritance tax.
Investments within a QNUPS are not restricted in the same way as for a QROPS or a SSAS – so making them the ideal tax shelter for Residential Property.
When taking benefits from a QNUPS – (from the age of 55) a ‘tax free lump sum’ of 25% of the fund is available. This forms part of the allowable limit on tax free cash under the normal pensions rules – but we do have planning available that will work around that and enable tax free benefits to be paid from age 55 from a QNUPS. The rules we use to achieve tax free access to funds from a QNUPS are related to annuity rules which follow HMRC’s own guidance and accepted practice.
HOW CAN I USE A QNUPS?
There are a whole range of amazing uses for a QNUPS – they can invest into shares in your business and pay 0% tax on any dividends or growth in the shares. With the Entrepreneur’s Relief being restricted to only £1m – putting shares into a QNUPS can shelter ALL the future profits from CGT, not just the first £1m.
A QNUPS can also grant loans to your UK company and all interest charged is received in the QNUPS free from tax – but is still an allowable expense for the company taking on the loan.
Where a Director has a ‘Director’s Loan’ in excess of £350,000 we can take the loan and make it a ‘contribution’ to the QNUPs. The company now owes the QNUPS the money and all interest paid will be received tax free by the QNUPS and as before – the interest will be an allowable expense within the company, which reduces the corporation tax payable.
An example of using a Director’s Loan could look something like this:
Loan = £500,000. Interest rate = 8%.
Employer pays £40,000 into the QNUPS as interest on the loan. The QNUPS pays no tax and the £40,000 can be invested just like in a normal pension – without tax! The added bonus is that that any loan capital repaid will fall outside the estate for IHT purposes – saving even more in tax and making the QNUPS an idea tax shelter. Our FREE Tax Consultation will let us tell you more based on your specific situation.