QNUPS structure – Viable for Buy-To-Let landlords?Make Text Bigger
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.
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:-
- Leave it invested and untouched up to age 75
- Purchase an annuity
- 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 firstname.lastname@example.org
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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