Equiom seminar highlights new UK tax rules

Wednesday 07 February 2018

More than 100 guests and members of the business community gathered at the Palace Hotel last month to hear presentations by tax experts from Equiom Solutions.

Speakers covered topics including tax planning for Isle of Man residents, Isle of Man company taxation, the proposed new rules regarding UK commercial property, as well as the extra-territorial reach of recently announced changes in UK tax legislation and its effect on local businesses and residents with assets in the UK.

The event was opened by Non-Executive Chairman of Equiom Solutions, Clive Stanford, and began with a presentation by Equiom Solutions Managing Director, Helen Woods on Isle of Man and UK tax planning for Isle of Man residents. Helen highlighted the issues around residence and domicile status and explained:

‘while you can be resident in both the Isle of Man and the UK, individuals can only have one domicile at any one point in time. You could, however, still be deemed UK domiciled for a number of years even if you have taken up residence elsewhere. That’s one to watch as it could have significant implications for your tax liabilities.’

She then went on to detail the three main types of UK tax that Isle of Man resident individuals may be exposed to: income tax, capital gains tax (CGT) and inheritance tax (IHT), and outlined some options to help manage these liabilities.

Senior Tax Consultant Glenn Cassidy then addressed the topic of investing in UK property and the new tax rules which now apply to non-resident individuals and companies:

‘From April 2017, shareholders of non-UK corporate entities holding UK residential property will be exposed to IHT. Two consultation documents were also released by HMRC in 2017 concerning the taxation of non-UK companies holding UK property. The first explores the proposed charge to UK Corporation Tax on non-UK resident companies holding UK property and is expected to come into effect from April 2020. The second concerns the charge to CGT for companies, individuals and trusts on gains realised by non-residents on disposals of UK commercial property including the proposed CGT charge on the disposal of indirect holdings of all UK property, effective from April 2019. Although these are only proposals and are out for consultation, it is likely that they will be enacted and as a result it is advisable to reassess how your UK property assets are structured ahead of April 2019.’

Senior Tax Consultants, Derek McNutt and Roy Callow then discussed the topic of Isle of Man company taxation. Derek introduced the subject by giving an overview of the Manx tax rates for companies and the Isle of Man’s tradition of ‘tax neutrality’, revisiting Zero/10 and the taxation of distributions. Roy followed with an examination of the options for withdrawing funds from companies including loans, directors’ fees and benefits in kind and the potential pitfalls of loans to participators:

‘Under the current Manx tax regime, all company distributions are potentially taxable. Excluded from this are loan repayments, so money can be taken out of the company and paid to a shareholder where there is a shareholder’s loan in place without being subject to tax. There are jurisdictions that take a different view and consider loan repayments to be distributions. The Isle of Man has so far not adopted this approach, but this could change.’

He reminded the audience that as company circumstances change, the tax position will be different:

‘The appointment of Isle of Man directors and incorporation of new companies needs to be monitored to ensure tax filing requirements are met. Penalties will apply if tax returns are filed late.’

Finally, Tax Director, Monica Dixie discussed several new pieces of legislation introduced by HMRC that have an impact on non-UK persons, companies and trusts:

‘These initiatives are politically important in the midst of publicity surrounding those individuals and structures that are not tax compliant. The aim is to crack down on people who are not paying their ‘fair share’ of tax, deter facilitation of tax evasion and enhance information collection for anti-money laundering purposes.’

She outlined the requirement to correct (RTC), the criminal corporate offence and the UK register of beneficial ownership of trusts:

‘There are reputational and financial risks of being implicated in non-compliance with these new measures. Moreover, the new legislation is far reaching and could affect both businesses and individuals.’

The seminar concluded with a Q&A session and Clive Stanford closed the event by saying:

‘Tax just gets more complicated each year. We hope these seminars have been useful in acting as a reminder to regularly reassess your tax position.’

Equiom Solutions provides tax and estate planning services to Isle of Man residents and businesses. The highly qualified and experienced team offers tax and estate planning advice and help with annual tax obligations, as well as outsourced tax compliance services for fiduciaries.  For more information, visit www.equiomgroup.com/tax