Qrops in France to pay tax on lump sum

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by: jamiesoadlie
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Date: Fri, 4 Mar 2011 Time: 4:58 PM
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Few QROPS advisers are aware of the tax change and the financial implications for pension investors as the provision has not been flagged in the UK.

British ex pats or overseas workers with UK pension rights who draw a cash lump sum from a QROPS after taking up residence in France are liable to pay income tax on any payment that exceeds ?5,000 (6,000 Euros).

Top rate taxpayers could pay tax at 41% on their 25% pension lump sum draw down - or 30% payment on a Isle of Man 50c QROPS.
On an average QROPS fund of ?130,000, that could mean a top rate tax bill of around ?12,000 on a 25% fund lump sum payment, even taking in to account the French income tax 10% tax-free allowance.

Ex pats warned about hidden tax charges

Financial advisers are suggesting that anyone moving to France as a permanent residence should take their pension lump sum before they go.
Ex pats living in France need to consider the impact income tax may have on their financial plans before drawing down any lump sum.

The rules do not only apply to a QROPS, but also include any lump sums paid under a private pension, occupational pensions and deferred draw downs from the UK state pension scheme.

The tax is applied to all QROPS not just those listed in France.

Government and local government pensions are not hit by the ruling, but some lawyers suggest the French government may broaden the legislation to capture draw downs from these as well.

France is a favourite retirement destination for ex pats, with an estimated 500,000 Brits making the country their home.

Anyone considering retirement to France should take immediate tax advice from a professional specialist. QROPS.net are the leading advisory firm

About the Author

Qrops are an extremely complicated bit of legislation and professional advice should always be taken