A loophole in the schemes used by wealthy earners to transfer pensions overseas was blocked on Wednesday in a move the Treasury said showed its determination to crack down on avoidance.

Officials said action was being taken to close “an unintended tax loophole” arising from a new double-tax treaty with Hong Kong that would have allowed residents of Britain to take tax-free pension payments.

The action is the latest of several moves by the Treasury to stop abuses of Qualifying Recognised Overseas Pensions Schemes, used by people retiring abroad to transfer benefits from UK pension schemes.

The Treasury said: “The measure will prevent individuals from taking advantage of a tax loophole that would have emerged today had the government not taken action.”

A clause in the Hong Kong tax treaty – taking effect on Wednesday and designed to prevent the same income from being taxed twice – said pension payments would be taxable only in the country they arose in and not in the country where the recipient lived. The Treasury had become aware of schemes that planned to take advantage of the clause, meaning that a UK resident transferring their pension to a QROPS in Hong Kong could receive pension payments tax free.

Paul Garwood of Smith & Williamson, the professional services firm, said the move to override a treaty provision was un­usual but clearly justified. Louise Somerset, tax director of the wealth management arm of RBC, said the move was reasonable and in line with extensive efforts by Revenue & Customs to ensure that the provisions of QROPS mirrored UK pensions.

Revenue & Customs is currently engaged in a court fight over its decision to delist Singapore QROPS as a result of an alleged breach of conditions.

David Gauke, the exche­quer secretary, said: “The government has set out a clear strategy on preventing tax avoidance. We will not hesitate to take action to stop those who seek to take unfair advantage of un­intended tax loopholes. Today’s measure demonstrates our commitment to act quickly to close these.”

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