How can you hold property investments in your Pension Arrangement? Graham Brown

1. How can you hold property investments in your Pension Arrangement? Graham Brown 22nd October 2013

2. Types of Pension Arrangement Qualifying Recognised Overseas Pension Scheme (QROPS) Qualifying Non UK Pension Scheme (QNUPS) ORSO Scheme

3. ORSO SCHEME Occupational pension scheme Mandatory employer/employee relationship Minimum benefit age 50 Entire fund can be withdrawn as a lump sum tax free 15% Tax relief on employer contributions Extraordinary employer contributions amortised at 20% per year over a five year period. No tax on accumulation of benefits

4. QROPS Income paid gross (90% taxable if UK resident) in many jurisdictions depending on Double Taxation Agreement (DTA) Income flexible and 120% of Government Actuarial Departments (GAD) limits No 55% member payment charges (MPC) if non UK resident Doesn’t use up Lifetime Allowance (LTA) – Benefit Crystallisation Event (BCE) at transfer date No Inheritance Tax (IHT) on death PCLS of up to 30%

5. QNUPS Income paid gross or net of HK tax if HK QNUPS (90% taxable if UK resident) Income flexible No Government Actuarial Departments (GAD) limits No 55% member payment charges (MPC) Doesn’t use up Lifetime Allowance (LTA) No IHT on death Can withdraw 30%

6. QNUPS Conditions A QNUPS must be a legitimate pension • Open to local residents • Recognised as a pension in local law • Recognised for tax purposes under local tax law • 70% of funds to provide income for life HMRC will challenge if they deem inappropriate

7. QNUPS Case Study 1 Mr Jones Senior Executive – Age 55 Assets worth over £5 million UK Pension at LTA 5 years work life QNUPS Plan Transfer £1m existing assets Supplement Retirement Provision Acceptable as a retirement plan

8. QNUPS Case Study 2 Mr Harvey Retired – Age 65 Assets worth £3 million QNUPS Plan £1m Contribution Transfer existing assets Avoid Inheritance Tax Not acceptable as a retirement plan HMRC are likely to reject future claims

9. QNUPS vs. QROPS vs. ORSO • UK Inheritance Tax Exempt – as long as ORSO scheme structured correctly • All QROPS are QNUPS but not all QNUPS are QROPS • ORSO schemes can be structured as QNUPS but not QROPS without reference to HMRC • A QROPS is designed specifically to accept UK tax relieved funds and as such it has more restrictions applied to it than a QNUPS does • A QNUPS cannot accept UK pension contributions but it can accept other assets

10. Pension Arrangements and Property Comparison Table

11. Holding property through a QNUPS? The property is transferred from your own name to that of an offshore company • A sale event • You exchange the property for shares in the company of equal value • Capital Gains Tax • Stamp duty The pension scheme is the 100% share holder in the offshore company Financed property

12. UK Tax Treatment of Pensions

13. UK Taxation of a Hong Kong QNUPS Contributions are from tax paid income UK tax residents pay HK income tax – 17% A HK Tax certificate should be presented to HMRC annually. Savings of 28% UK income tax for someone who is subject to UK tax at the top rate of 45% and worked and saved for retirement in Hong Kong and retires to the UK to draw their Hong Kong pension.

14. Questions?

15. Disclaimer • You acknowledge that: (i) the information contained in this document and such other material issued in connection therewith (the “Content”) are provided for information purposes only and will not be regarded as advice on securities or collective investment schemes or other financial or investment advice; (ii) the Content is not intended for the purpose of advice, dealing or trading in securities or collective investment schemes; (iii) the Content is provided on an “as is” basis and by way of a summary and we do not guarantee the accuracy, completeness, or timeliness of the Content; (iv) none of the information contained in the Content constitutes a solicitation, offer, opinion, or recommendation by us to buy or sell any security, or provision of legal, tax, accounting, or investment advice or services regarding the profitability or suitability of any security or investment; (v) you should not rely on the Content as the sole means of making any investment decision relating thereto and you should seek professional, independent and specific advice on any such investment decision; (vi) the Content is not intended for use by, or distribution to, any person or entity in any jurisdiction or country where such use or distribution would be contrary to law or regulation; and (xii) the Content has not been authorised or approved by the Securities and Futures Commission of Hong Kong or any regulatory body of competent authority whether in Hong Kong or elsewhere. • Accordingly, you assume all responsibility and risk for reliance upon and the use of the Content and, we, our agents, directors, officers, employees, representatives, successors, and assigns expressly disclaim any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) the use of the Content, (ii) reliance on any information contained in the Content, (iii) any error, omission or inaccuracy in any such information including, without limitation, financial data, forecasts, analysis and trends, or (iv) any action or non-performance resulting from the foregoing. This exclusion clause shall take effect to the fullest extent permitted by applicable laws. • Any statement contained in the Content is made on a general basis and we have not given any consideration to nor have we made any investigation of the investment objective, financial situation or particular need of any user or reader, any specific person or group of persons. • You are advised to make your own assessment of the relevance, accuracy and adequacy of the information contained in the Content and conduct independent investigations as may be necessary or appropriate for the purpose of such assessment including the investment risks involved. You should consult an appropriate professional advisor for legal, tax, accounting, or investment advice specific to your situation, as to whether any governmental or other consents are required or if any formalities should be observed for the purposes of making such investments as are mentioned in the Content. If you are unsure about the meaning of any of the information contained in the Content, please consult your financial or other professional advisor.