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Apr. 28, 2015

Risky offshore inheritance tax loophole could cause fines & prosecution

Wherever there are rules there will always be people looking for loopholes in the law to get around them, and some of these loopholes are more dangerous and questionable than others. The latest inheritance tax loophole to emerge has been branded as extremely dangerous as it puts wealthy investors at risk of financial losses, fines and prosecution.

The loophole allows investors to instantly protect unlimited sums of money from being eligible for inheritance tax by placing them into a foreign pension scheme in either Guernsey or Malta.

These foreign pension schemes were originally set up to allow UK residents who were living abroad access to their retirement fund, they are known as qualifying non-UK pension schemes. They were never intended to be used to help people to avoid paying inheritance tax.

But as with anything that sounds too good to be true, wealth managers are predicting that there could be severe consequences for people who are benefitting from such schemes. Most wealth managers believe that HM Revenue and Customs will recognise that people are abusing these schemes and crack down on them by collecting their taxes, issuing fines and even prosecuting the worst offenders.

Despite the concern that has been voiced about this dubious tax avoidance schemes there have still been a significant number of regulated financial advisors up and down the country selling the scheme to wealthy investors.

In an article on the Investors Chronicle website Tom Welby, a tax expert from the wealth management firm Saunderson House warned that “HMRC has the power to apply new laws retrospectively, too, which would mean UK residents using QNUPS to IHT plan years before a rule change would be caught and forced to cough up what they owe or face a legal battle.” We urge people to think twice before using this risky scheme or similar ones and instead setting up a reliable inheritance tax savings trust like the one that we offer at Steele Rose.