| YOU HAVE JUST HAD THE MEMO. HERE IS WHAT IT MEANS. STM Malta Pension Services Ltd has circulated a memorandum dated 22 May 2026, prepared by Trevor Egan at Buzzacott Livingstone Limited, to American members of the STM Malta Pension Plan. The memo confirms in writing that the plan is treated as a Foreign Grantor Trust for US tax purposes, that Form 3520 and Form 3520-A filings are required annually, and that affected members should consider the IRS Streamlined Filing Compliance Procedures to correct any prior non-compliance. This is significant communication. It is also not new. The IRS position the memo formalises is the same position Cameron James set out months earlier in our pillar article on this topic, which you can read at Malta QROPS Form 3520: IRS Foreign Trust Rules and the Streamlined Fix. This article translates the memo into plain English, sets out what to do next, and points you to the deeper analysis where it helps. |
Why you received the memo, and what changed
The Buzzacott memorandum is addressed to STM Malta Pension Services Ltd and was prepared by Trevor Egan, a specialist cross-border tax practitioner at Buzzacott, a well-regarded UK accounting firm. STM has circulated it to affected members because the reporting requirements it describes are significant, the penalties for non-compliance are severe, and many members may not have been filing the required US information returns.
Receiving the memo does not mean you have done anything wrong. It means your trustee is putting you on formal notice of obligations that have applied to your arrangement since it was established. Most members did not know about them. Many were told by the adviser who arranged the transfer that the QROPS would be treated as a foreign pension for US purposes. That was wrong then and it is wrong now. The Buzzacott memo simply formalises what specialist US-UK tax practitioners (and, for what it is worth, Cameron James) have been saying for some time.
The trigger for the wider conversation was the joint US-Malta Competent Authority Arrangement of December 2021, which confirmed that US tax treaty relief is not available in respect of Maltese pension plans of this type. The Double Tax Agreement between the United States and Malta does not shelter STM Malta pensions from US reporting. Buzzacott acknowledges that the validity of the CAA has been questioned in some quarters, but strongly recommends that members adhere to the guidelines, particularly when using the Streamlined procedures. We agree with that recommendation.
Three things the memo nails down
If you skim the Buzzacott document, three points are doing most of the work. Each of them is the same point Cameron James was making in the pillar article months ago.
| ONE · THE PLAN IS A FOREIGN GRANTOR TRUST The STM Malta Pension Plan is classified as a Foreign Grantor Trust for US tax purposes. This is not a new development. It is the IRS view that has applied since the plan was established. The classification depends on the fact that the member is both the settlor (the person who funded the trust) and the beneficiary, and that both are US persons. The level of control you have, or the powers held by the trustee, are not relevant to the classification. |
| TWO · THE US-MALTA TREATY DOES NOT HELP The December 2021 US-Malta Competent Authority Arrangement confirmed that treaty relief is not available for Maltese pension plans of this type. The DTA does not shelter your STM Malta arrangement from US reporting. Buzzacott notes that the CAA has been challenged in some quarters, but strongly recommends compliance with its guidelines while it stands. |
| THREE · FILING IN ISOLATION IS THE WRONG MOVE The memo specifically points members toward the Streamlined Filing Compliance Procedures rather than telling them simply to start filing Form 3520 going forward. This is the same point we made in the pillar article. Filing a current-year Form 3520 without addressing the years that were not filed signals to the IRS that a foreign trust exists, establishes that you knew about it, and creates an explicit question about why prior years went unreported. That question is much harder to answer without the protection of a Streamlined non-wilful certification. |
Your four-form reporting footprint
As a US member of the STM Malta plan, your annual reporting footprint with the IRS sits on top of your standard Form 1040 and consists of four pieces.
Form 3520 and Form 3520-A
Form 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) is required every year. Form 3520-A (Annual Information Return of Foreign Trust with a US Owner) is filed as an attachment. In practice, the trustee should file 3520-A, but where the trustee does not, the member files a substitute 3520-A in its place. Together these forms report the existence and activity of your Foreign Grantor Trust to the IRS each year.
FBAR (FinCEN Form 114)
The FBAR reports your interest in the STM Malta plan as a foreign financial account. It is filed separately from your Federal tax return, through the FinCEN online portal. The standard deadline is 15 April, with an automatic extension to 15 October.
Form 8938 (FATCA)
Form 8938 (Statement of Specified Foreign Financial Assets) is filed as part of your Federal tax return where the reporting thresholds are met. If you are filing Forms 3520 and 3520-A, you also report the number of those forms filed in Part IV of your Form 8938.
Form 8621 (PFIC reporting, where applicable)
Depending on the funds held inside your STM Malta plan, you may also need to file Form 8621 for each non-US fund classified as a Passive Foreign Investment Company. Most non-US investment funds, including UCITS funds and many UK-domiciled investment funds, fall into this category. A typical STM Malta plan holding ten such funds becomes ten separate Forms 8621 every year.
Filing deadlines, at a glance
These are the deadlines the Buzzacott memo cites for the most common situations. They are subject to the usual IRS rules and to any extension you have filed.
| Situation | Form 3520 due | FBAR due |
|---|---|---|
| US-based member, no extension | 15 April | 15 April |
| Non-US-based member, no extension | 15 June | 15 April |
| Extension filed (Form 4868) | 15 October | 15 October |
The PFIC issue, and why a UK SIPP is treated differently
This is one of the points where the Buzzacott memo and our own analysis line up most clearly. Unlike a UK SIPP held by a US person, which benefits from a PFIC exemption under the US-UK Double Tax Agreement during the accumulation phase, a Malta QROPS reclassified as a foreign trust does not carry the same exemption. PFIC reporting and PFIC tax treatment apply to non-US funds inside the STM Malta plan in a way they would not inside a properly structured UK SIPP.
PFIC treatment under the default excess-distribution regime is punitive. Gains are taxed at the highest marginal rate plus an interest charge, unless a Qualified Electing Fund or mark-to-market election is made, and many UK-domiciled funds do not produce the documentation needed to support those elections. The practical result is that the investment portfolio inside the STM plan needs to be reviewed and, in most cases, restructured into US-domiciled funds and ETFs. This is a separate workstream from the tax compliance side and one of the places where Cameron James adds direct value alongside the specialist tax adviser. For a fuller discussion, see our Fidelity PFIC restrictions guide.
Three paths revisited, risk-rated
In the Form 3520 pillar article we set out the three options available to affected members and gave our assessment of each. The Buzzacott memo’s guidance is consistent with the framework we used. Here it is again, restated for STM Malta members specifically.
| OPTION ONE · EXTREME RISK Continue filing your STM Malta plan as a qualifying foreign pension The IRS has formally rejected this position. The CAA confirms that treaty relief does not apply. Buzzacott’s memo formalises the same point. Continuing to file as a foreign pension maintains a stance the IRS has already publicly rejected, with penalty and interest exposure that compounds each year, and theoretically criminal liability under Title 26 in wilful cases. We do not recommend this option, and no specialist tax adviser we work with considers it a defensible long-term position. |
| OPTION TWO · HIGH RISK, AND LIKELY COUNTERPRODUCTIVE Report as a pension this year and transfer back to a UK pension scheme Some advisers continue to recommend a return UK transfer as the fix. The reasoning is that moving the funds back into a UK SIPP makes the problem go away going forward. The specialist tax advisers we work with are clear that this approach is high risk and likely counterproductive. First, a transfer back does nothing to resolve prior years of non-compliance. The IRS’s concern is with how the arrangement was held and reported historically, not where the funds end up. Second, from 6 April 2027, UK registered pension funds will fall within the scope of UK inheritance tax. Funds in a properly restructured Malta QROPS may remain outside that net. A return UK transfer brings them directly into scope, which for many members represents a meaningful future tax cost. We address this point at length in our Brite Advisors USA: QROPS vs SIPP analysis. Third, the suggestion that a transfer back fixes the IRS issue assumes that the reclassification will not apply to the years the arrangement existed as a Malta QROPS. It will. The classification is retrospective on those years, regardless of where the funds go next. |
| OPTION THREE · THE PATH WE RECOMMEND EXPLORING Engage proactively through the IRS Streamlined Filing Compliance Procedures This is the route the Buzzacott memo points to and the route Cameron James has been encouraging affected clients to explore with specialist tax advisers for several months. It declares that the arrangement is correctly understood as a foreign trust, addresses the back history through a structured IRS amnesty programme, and produces a clean, defensible position going forward.The outcome of going through Streamlined correctly is usually better than members initially fear. You get a clean confirmed tax position, clarity on how future distributions will be treated, no outstanding IRS exposure, and, crucially, funds that may remain outside the scope of the April 2027 UK inheritance tax regime. For many members, that combination of outcomes is materially better than the alternatives. |
How SDOP and SFOP actually work
The IRS Streamlined Filing Compliance Procedures are an amnesty programme for taxpayers whose failure to report foreign assets or income was non-wilful: a genuine misunderstanding of the law, not deliberate concealment. There are two variants, depending on where you live.
Streamlined Domestic Offshore Procedures (SDOP)
SDOP applies to US-based members. You file amended Federal tax returns (Form 1040X) for the most recent three years of non-compliance, Forms 3520 and substitute 3520-A for those years, and six years of FBARs where FBARs also need to be corrected. Late filing and late payment penalties are eliminated. You pay any underpaid tax plus interest, any applicable PFIC tax, and a Miscellaneous Offshore Penalty of 5% of the highest aggregate value of your unreported foreign financial assets over the six-year period. In practice that is usually 5% of the peak value of your STM plan over the period.
Streamlined Foreign Offshore Procedures (SFOP)
SFOP applies if you are resident outside the United States. The key advantage is that the 5% Miscellaneous Offshore Penalty is waived entirely. To qualify, you must have spent at least 330 full days outside the US in at least one of the three relevant tax years. Other requirements broadly mirror SDOP.
The non-wilful certification
Both routes require you to certify that the failures resulted from non-wilful conduct, defined as negligence, inadvertence, or a good-faith misunderstanding of the law rather than deliberate concealment. For most STM Malta members, the non-wilful argument is genuinely strong. These arrangements were marketed by regulated UK and international advisers as pension-compliant structures. Members transferred in good faith. The foreign trust classification was disputed in parts of the financial planning industry for several years. That context matters when making the certification. It is still essential to take independent specialist tax advice to confirm the position in your specific circumstances.
What happens if the CAA is overturned in the future
Buzzacott raises a sensible practical question: what if the Competent Authority Arrangement is modified or overturned at some point in the future? The memo notes that members who have filed in line with the CAA guidelines would be able to file amended returns and claim refunds where appropriate, subject to the usual US refund statute of limitations (generally three years from filing or two years from tax payment, whichever is later). In other words, engaging through Streamlined now does not permanently lock you into an unfavourable position if the legal landscape later shifts. It is a structured, reversible step toward certainty.
| Jonathan Laws Senior Independent Financial Adviser, Cameron James “The Buzzacott memo is not breaking news to anyone who has been paying attention to how the IRS treats Malta pension arrangements held by US persons. The reason we are pleased to see it is not that it changes the analysis. It is that it finally puts the analysis in writing, on STM-headed correspondence, in language that members and their existing tax preparers cannot easily ignore. What I would say to STM members reading this is the same thing I said to our clients when we published the pillar Form 3520 article earlier this year. The right response is not to panic, and it is not to file a standalone Form 3520 and hope the prior years are forgiven. It is to step back, work out which of the three Streamlined paths fits your circumstances, and execute on it as a single coordinated submission with a specialist tax adviser. The cleanest outcome is reachable for most members, and it is materially better than the worst-case alternative. The other point worth making explicitly is on the return UK transfer suggestion. I continue to see this presented as the simple fix. It is not. It does not resolve the prior years and from April 2027 it actively creates a new UK inheritance tax problem. For members with substantial pension wealth and family they want to pass assets to, the difference in long-term outcome between a properly preserved Malta QROPS and a UK SIPP under the new IHT regime is significant. Get that decision right at the planning stage, not in the rush to respond to a trustee letter.“ |
Three cross-border situations, one memo
The Buzzacott memo is addressed to American members of the STM Malta plan, but the practical reality is that ‘American member’ covers a wider group than US citizens living in the US. Cameron James works across borders. On the Form 3520 question, three reader groups keep showing up, and the memo applies to all three. The IRS rules are identical. The practical mechanics differ.
UK nationals living in the United States
You moved to the US for work, family, or retirement. You are now US tax-resident through the green-card test or the substantial presence test, even though you remain a UK national. You file a US return each year. When you originally transferred your UK pension into an STM Malta arrangement, the adviser who set it up may have framed it as a clean way to hold the funds outside the UK. The IRS does not see it that way. From a US tax perspective, you are a US person. Form 3520 applies to you exactly as it applies to a US citizen. Under Streamlined, you look at SDOP rather than SFOP because you live in the US, and the 5% Miscellaneous Offshore Penalty applies. That is still a small fraction of the worst-case 35% Form 3520 penalty.
US citizens and green-card holders living in the UK or the EU
You hold a US passport, or a green card, but you live in London, Edinburgh, Manchester, Paris, Frankfurt, or anywhere else in Europe. The IRS still requires you to file a US return each year on your worldwide income. The STM Malta reporting position applies to you. The good news is that you will likely qualify for SFOP rather than SDOP, provided you spent at least 330 full days outside the US in at least one of the three relevant tax years. SFOP carries no Miscellaneous Offshore Penalty at all, which is a materially better starting point than your US-resident counterparts have.
Cross-border professionals and dual-status individuals
You move between jurisdictions for work. You may be a dual citizen, or have spent time in the US and subsequently relocated to the Middle East, Asia, or elsewhere. Your status under US tax law in any given year depends on where you have been and how the substantial presence test interacts with treaty tie-breaker rules. The IRS reporting position on your STM Malta holding is the same set of forms. Which Streamlined variant applies, and what your prior-year filing position should have been, depends on a year-by-year residency analysis. This is exactly the type of case where a specialist US-UK tax adviser working alongside a cross-border financial planner produces a noticeably better outcome than either professional acting alone.
What to do this week
Receiving the Buzzacott memo is a prompt to act, not to panic. The next steps are clear.
- Do not file a standalone Form 3520 for the current year while leaving the prior years unaddressed. Decide on the right disclosure pathway first.
- Engage a qualified US tax adviser with specific experience in international information returns and the Streamlined procedures. This is specialist work. Not every CPA or accountant has the relevant background. Cameron James can refer you to advisers with direct experience in this area. We have no commercial relationship with the specialists we introduce and receive no introducer fees.
- Establish which years of Form 3520, Form 3520-A, and FBAR filings are outstanding for your STM Malta membership. The standard Streamlined package covers three years of income tax returns and six years of FBARs.
- Confirm whether SDOP or SFOP applies to your situation, by reference to the 330-day non-residency test for the three relevant years.
- Review the investments inside your STM plan for PFIC exposure. Non-compliant holdings generate substantial additional tax charges under the default excess-distribution regime and need to be restructured into US-domiciled funds and ETFs. This is the part of the workstream where Cameron James adds direct value.
- Consider whether your overall pension structure remains appropriate.
| Speak to Cameron James USA about your STM Malta QROPS If you have received the Buzzacott memo and want to understand your pension options, our advisers specialise in UK pension arrangements for US-connected clients, including STM Malta QROPS holders. We operate on a fixed-fee basis with no commissions and no introducer arrangements. A free 30-minute consultation will give you a clear assessment of your position and the realistic options open to you. Book a free discovery call → |
Frequently asked questions
Does the Buzzacott memo mean I owe US tax right now?
Not necessarily. The memo sets out reporting obligations: the requirement to file certain information returns with the IRS each year. Whether any additional tax is owed depends on your individual circumstances, including whether you have underpaid tax on income or gains within the plan in prior years. A qualified US tax adviser can assess this for you alongside the Streamlined submission.
Can I simply ignore the memo?
No. If you are a US person and you hold the STM Malta plan, the reporting obligations apply to you by law. Ignoring them increases your exposure to late filing penalties, which the memo describes as very high. The IRS is also actively scrutinising Malta pension arrangements at the moment, which makes inaction a particularly poor choice.
Does the Streamlined procedure guarantee no penalties?
Under SDOP, late filing and late payment penalties are eliminated, but a Miscellaneous Offshore Penalty of 5% of the peak plan value over the six-year period still applies. Under SFOP (for non-US residents who meet the 330-day test), that 5% penalty is also waived. Neither procedure eliminates interest on any unpaid tax.
Should I transfer my STM Malta QROPS to a UK SIPP?
This is a question we address in detail in both our Brite Advisors USA: QROPS vs SIPP article and the Form 3520 pillar piece. A transfer may well be in your long-term interest, but it should not be pursued as a way of bypassing the compliance process. The IRS’s concern is with historical reporting, not where the funds currently sit. A transfer also needs careful consideration in light of the April 2027 UK inheritance tax changes, which bring UK pensions into the IHT net and may make a properly preserved QROPS the better long-term wrapper for some members.
Does Cameron James provide US tax advice on the Streamlined procedures?
No. The Streamlined procedures are US tax compliance matters. Cameron James does not provide US tax advice. We work with clients on the pension structure, investment strategy, and PFIC compliance dimensions of the issue, and we coordinate with independent specialist CPAs and US-UK tax advisers for the tax work itself. We have no commercial relationship with the tax specialists we introduce and receive no referral fees. US advisory services are provided through Beacon Global Advisor Network, LLC, an SEC-registered investment adviser.
Why has Cameron James been writing about this for months?
Because the underlying position has been clear to us for some time, and our clients deserved to understand it before receiving a formal letter from their trustee. Our pillar article Malta QROPS Form 3520: IRS Foreign Trust Rules and the Streamlined Fix sets out the same analysis the Buzzacott memo now confirms. We published it to ensure that clients working with us, and any reader who found it through search, had access to an honest assessment of the situation and the available options without having to wait for a formal communication from STM or any other trustee.
What if I am a UK national living in the United States, not a US citizen?
The Form 3520 reporting position depends on your US tax-residency status, not on your citizenship. If you are US tax-resident through the green-card test or the substantial presence test, the IRS treats you as a US person for tax purposes and the same reporting obligations apply. Many UK nationals who have lived in the US long-term are surprised to discover that the position is identical to that of a US citizen. The pillar article addresses this point in detail.
What happens if the Competent Authority Arrangement is overturned in the future?
Buzzacott raises this question and the answer is encouraging. Members who have filed US returns in line with the CAA guidelines would be able to file amended returns and claim refunds where appropriate, subject to the usual US refund statute of limitations (generally three years from filing or two years from tax payment, whichever is later). Engaging through Streamlined now is not an admission of wrongdoing and it is not permanent. It is a structured, reversible step toward certainty.
