KPMG held its latest UK and Manx Tax Briefing at the Claremont on Wednesday 30 September, attracting nearly 200 local professionals and business leaders. As with previous sessions, the speakers addressed a diverse range of topics, and covered a lot of ground in their respective presentations. As an additional bonus, the audience was able to interact with the speakers via software which allowed questions posed by the speakers to be answered in real time!
Having opened proceedings in his inimitable style, Director Greg Jones discussed the UK Summer Budget’s wide ranging proposals covering the taxation of non-UK domiciled individuals, and Inheritance Tax (“IHT”). It was clear that this first point will, if enacted as it currently stands, have a significant impact upon the tax affairs of individuals who have previously been accepted as non-UK domiciled by HMRC. Greg stressed that anyone becoming “deemed” domiciled under the proposed legislation would be exposed to all UK taxes and, given the implementation date of 6 April 2017, it was clearly vital that those potentially affected now consider their position.
Greg also outlined the proposed new scope of IHT (again to be implemented from 6 April 2017), which would see all UK residential property, regardless of how its ownership is held, fully within the scope of IHT.
It was interesting to note that, when asked how they thought affected individuals might react to these proposals, the audience’s opinion was evenly split between individuals leaving the UK, never to return, and simply paying the taxes and accepting their new “status”.
The next session was presented by David Parsons (Director) who opened with an update of issues introduced in the most recent Manx Budget, highlighting a possible tax “holiday” to ease the implementation of the 20% rate of corporate tax in respect of income from land and property. David also flagged up the relatively benign regime currently in place where Isle of Man taxpayers make a voluntary disclosure to the Income Tax Division (“ITD”) in respect of outstanding tax liabilities. With the increasing likelihood of a more robust approach to the underpayment of tax (for whatever reason), a voluntary disclosure might represent a less financially painful outcome for taxpayers than having their failures unearthed by the ITD.
Returning to a topic he has discussed at previous updates, David commented on the international “automatic exchange” regime and explained that the US has announced an unexpected (but welcome) twelve month extension to the first tranche of reports to be made to the US authorities. Closer to home, the Manx government is now considering which jurisdictions it will exchange information with when the Common Reporting Standard (“CRS”) goes live on 1 January 2016. A clear majority of the audience expressed the view that the Auto Exchange regime would have a “very significant” impact upon their business and/ or the businesses of their clients.
Sandra Skuszka (VAT Associate Director) then delivered an update on VAT which centred primarily on the ability of holding companies to recover VAT, and the application of VAT to the management of funds within a pension. Sandra explained that a holding company must consider whether the costs it incurs are in respect of “economic” or “non-economic” activities. The former, which can include management services and the provision of loans, will permit a recovery of VAT while the latter will not. With regard to pension fund management, Sandra explained that HMRC have specified four tests that must all be passed if a fund is to be considered as a “Special Investment Fund” which, in turn, would exempt the associated management costs from the scope of VAT.
The final session of the morning was presented by Rob Rotherham (Tax Associate Director). Rob talked the audience through the UK’s recently introduced Diverted Profits Tax (“DPT”) and it was clear that the DPT will need to be considered by larger Manx companies with UK customers. It is intended to tackle circumstances where companies aim to divert their profits offshore and reduce their UK corporate tax liability. Although the legislation is intended to curb what HMRC view as “aggressive avoidance”, Rob explained that the rules are sufficiently widely drawn to apply to many other, less obviously aggressive, arrangements.
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