TMF is the trustee of a pension scheme set up in Singapore, known as Recognised Overseas Self Invested International Pensions Retirement Trust (Singapore) – ‘ROSIIP’. The question to be determined by the Courts was whether ROSIIP is a qualifying recognised overseas pension scheme (QROPS). This turns on whether ROSIIP satisfies conditions set out in what are generally known as the 2006 regulations which provide that:
“A scheme is ‘recognised for tax purposes’ under the tax legislation of a country or territory in which it is established if it meets the primary conditions and also meets one of Conditions A and B.
Primary condition 1
The scheme is open to persons resident in the country or territory in which it is established.
Primary condition 2
The scheme is established in a country or territory where there is a system of taxation of personal income under which tax relief is available in respect of pensions and:
(a) tax relief is not available to the member on contributions made to the scheme by the individual or, if the individual is an employee, by their employer, in respect of earnings to which benefits under the scheme relate; or (b) all or most of the benefits paid by the scheme to members who are not in serious ill health are subject to taxation.
For the purposes of this condition ‘tax relief’ includes the grant of an exemption from tax.
The scheme is approved or recognised by, or registered with, the relevant tax authorities as a pension scheme in the country or territory in which it is established.
If no system exists for the approval or recognition by, or registration with, relevant tax authorities of pension schemes in the country or territory in which it is established: (a) it must be resident there; and (b) its rules must provide that: (i) at least 70% of a member’s UK tax-relieved scheme funds will be designated by the scheme manager for the purpose of providing the member with an income for life, and (ii) the pension benefits payable to the member under the scheme (and any lump sum associated with those benefits) must be payable no earlier than they would be if pension rule 1 in section 165 applied (in other words age 55).
Was either of Condition A or B satisfied?
The High Court had held that the existence of section 5 of Singapore Income Tax Act (which on the basis of expert evidence covered only occupational schemes) showed that there was in Singapore a system for the approval or recognition by, or registration with, relevant tax authorities of pension schemes. Condition B could only be satisfied if there is no such system. Therefore ROSIIP could not satisfy that condition. Unfortunately for it, it could not satisfy Condition A because the system only allows for the approval of occupational pension schemes, which ROSIIP is not. The Court of Appeal upheld this analysis.
The Court of Appeal also decided that in “practical terms” ROSIIP was not open to Singaporean residents so Primary condition 1 could not be satisfied. ROSIIP was structured (for Singaporean tax purposes) as a foreign trust which excluded Singaporean residents from benefit.
The Court of Appeal accepted that the High Court had been presented with “limited material” and might have come to a different conclusion. However the High Court analysis was not clearly wrong and the Court of Appeal could not overturn it.
It will be interesting to see if there will be a further appeal to the Supreme Court.