QNUPS structure – Viable for Buy-To-Let landlords?

QNUPS structure – Viable for Buy-To-Let landlords?

14:55 PM, 15th December 2015, About 9 years ago 11

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QNUPS? Just suppose you could pay a flat rate of 20% tax on gross rental income regardless of how much profit you receive. Then sweeten the deal by removing any potential for capital gains tax and/or inheritance tax. In a nutshell, that’s what can be achieved by using a QNUPS structure to invest into Buy-To-Let. QNUPS

I’ve read that many landlords intend to purchase through Limited Company structures in order to avoid the restrictions on finance cost relief but I thought it would be worth looking into some of the less well known alternatives. Please note that the basis of this article is my own research. I cannot guarantee the accuracy of the content and this article should most definitely NOT be construed as professional advice.

QNUPS is an abbreviation for Qualifying Non-UK Pension Scheme. The rules for this type of pension scheme are very different to other pension schemes including personal pensions, SIPP’s and SSAS’s. For example, a QNUPS can invest into residential property and its members can borrow up to 30% of the fund value tax free. A commercial rate of interest is payable but the interest goes back into the QNUPS.

There is no tax relief on investments into a QNUPS as there would be with more conventional pension schemes.

All pension schemes are held in a form of trust and are exempt from CGT and IHT, the difference with a QNUPS is that the trust is based offshore. The reason that gross rental income is taxed at a flat rate of 20% is because withholding tax rules are applied based on the QNUPS failing to qualify for the HMRC Non-Resident Landlord Scheme. This is a bad deal for highly geared landlords but the lower the LTV and the higher the rental profits the more attractive it becomes.

From the age of 55 onwards the options appear to be much the same as with any other pension scheme, i.e. draw up to 25% of the fund value in tax free cash and then three options for the balance:-

  1. Leave it invested and untouched up to age 75
  2. Purchase an annuity
  3. Retain income producing assets as a pension A.I.S. (alternative income source)

Post retirement income from a QNUPS is taxed in your country of residency.

Borrowing for Buy-To-Let purposes is possible but not from any of the Buy-To-Let lenders you will find on mortgage sourcing software platforms. Maximum LTV’s available seem to range from 50% to 60% according to my research. The only lenders I have come across providing mortgage facilities to QNUPS so far have been private banks who only seem to get interested in even having a conversation with potential clients if they have over £500,000 of investable cash and wish to secure lending on prime property in cities such as London, Cambridge and Oxford. If you come from an ‘old money’ family and you were educated at Eaton and Oxbridge you will probably do well with a QNUPS because that’s the demographic QNUPS structures and associated financing appears to be designed for. However, if the old boys network consider you to be ‘Nouveau riche’ you might also be lucky enough to get a look in.

A few weeks ago I promised to look into QNUPS for Buy-To-Let landlords. I’m glad I did but I don’t think this will be the right structure for many. During my research I have made some very interesting contacts though, so if you would like an introduction to people who specialise this please feel free to drop me a line explaining why you think this structure might suit you, and perhaps more importantly why you might be suited to a QNUPS and the advisers associated with them. My email address is mark@property118.com

If you have completed any research into using QNUPS as a Buy-To-Let ownership structure for yourself please share your thoughts via the comments section below.

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Chris Byways

0:07 AM, 16th December 2015, About 9 years ago

Interesting research, thanks.

"The IHT exemption may be an important consideration for your UK domiciled clients wishing to incorporate valuable IHT savings into their retirement planning." Is a potential benefit, as well.



3:20 AM, 16th December 2015, About 9 years ago

i rather have have the feeling that this could be one of the best posts i have ever read !


3:26 AM, 16th December 2015, About 9 years ago

Reply to the comment left by "Trendo " at "16/12/2015 - 03:20":


When can I take a pension?

You can “retire” at any time from age 50 and must start to take benefits from age 75.


Chris Byways

8:52 AM, 16th December 2015, About 9 years ago

Reply to the comment left by "Trendo " at "16/12/2015 - 03:26":

Tha Aviva link I gave states:

"benefits should not start payment until the member has reached the normal minimum pension age applicable in the UK (currently 55), unless benefits are taken under the scheme’s ill health rule."

Andrew Hammond

13:29 PM, 16th December 2015, About 9 years ago

Mark, I have been involved with QNUPS for several years now - especially for HNW individuals looking for tax efficient alternatives to traditional pensions - often looking to take advantage of the appealing ability to hold BTL properties within the offshore tax arrangement.

In my experience, and I think your original post show that things have not changed since I started looking at them, there are 3 main issues why these are not the holy grail many people think they could be:
1) Whilst it is possible to hold a BTL property in a QNUPS you cannot just move your existing property into the arrangement, especially if it has an existing mortgage (big problem for traditional lenders in this respect - they just wont allow it. This requires refinancing, if you can find a lender who is interested.
2) Transferring existing properties used to be 'allowed' without incurring CGT as the 'owner' still held a beneficial interest. This is no longer the case - similar to moving a personal BTL into a Ltd company in the UK.
3) QNUPS are a 'pension' and as such must be capable of providing an income. Not usually an issue due to the natural rental income but can cause problems. You should really have a mixture of more flexible traditional investment assets together with property - certainly not ALL your assets held in this type of structure as HMRC could become 'interested' due to the assets held with a QNUPS being exempt from IHT.
As Mark said in the original post - a possible option in very specific circumstances but certainly not for everyone and definitely requiring professional, regulated advice.

Mark Alexander - Founder of Property118

13:49 PM, 16th December 2015, About 9 years ago

Reply to the comment left by "Andrew Hammond" at "16/12/2015 - 13:29":

Hi Andrew

Thank you for your excellent post and welcome to Property118. Based on my research to date I concur with everything you have said.

HOWEVER, the advisers I have been speaking to have provided me with some interesting examples of where a QNUPS might prove to be highly beneficial, i.e.:-

1) Where a high net worth individual has money to purchase Buy-to-Let investment properties, i.e. using a QNUPS structure as opposed to a company.

2) Where a HNW individual doesn't have a major CGT problem, for example where there has been no capital gain or where capital gains up to 5th April 2015 do not count due to being non-UK residents in a CGT favourable jurisdiction, e.g. Malta, Portugal, Andorra, Israel, Cyprus, Monaco, Belize etc. etc. In such cases an "in-specie" transfer may be possible and refinancing may also be avoidable using a Beneficial Interest Company Trust strategy - see >>> http://www.property118.com/avoid-refinancing-landlord-incorporation/82791/ However, SDLT would be payable so this would need to be factored into making a decision based on viability.

Do you concur?

Are there any other examples you can think of where Buy-To-Let landlords could utilise QNUPS to their advantage?

Ian Ringrose

23:33 PM, 16th December 2015, About 9 years ago

If you are a 40% tax payer in retirement, you lend up having paid 44% tax on your gross rent by the time the money is in your hands. (A basic rate tax payer in retirement lends up paying 32%.)

So it only seem to offer IHT benefits and to help people that will be living somewhere will a lot lower tax rate when in retirement.

Mark Alexander - Founder of Property118

21:25 PM, 27th January 2016, About 8 years ago

I had a VERY interesting meeting this afternoon talking about QNUPS and their tax advantages.

It was a real eye opener and I now believe they could be a lot more useful than I first thought.

I learned that a QNUPS can be a member of an LLP and that partners in an LLP can transfer in properties without CGT or SDLT and without having to refinance. There is then some really clever stuff that can be done between the 'partners' in terms of the QNUPS creating an annuity and swapping it for the beneficial interests in the property. That was just one of the strategies and there were a lot more. Please don't ask me for details but if you have £3m or more of property and want to know more I can put you in touch with an expert in this subject.

Andrew Hammond

7:20 AM, 28th January 2016, About 8 years ago

Hi Mark - I would be interested in speaking to your contact about this.
Many thanks.

Mark Alexander - Founder of Property118

9:38 AM, 28th January 2016, About 8 years ago

Reply to the comment left by "Andrew Hammond" at "28/01/2016 - 07:20":

Please drop me an email with your contact details. My email address is mark@property118.com

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