Equiom seminar highlights importance of reviewing your UK assets

Tuesday 05 February 2019

More than 130 delegates gathered at the Palace Hotel last month to hear presentations by tax experts from Equiom. Speakers covered topics including succession planning, what information HMRC may hold on Isle of Man residents, changes to the taxation of UK property and an Isle of Man tax update.

The event was opened by former Tax Director at Equiom, Phillip Dearden and began with a presentation by Managing Director of Equiom’s tax business, Helen Woods on protecting your wealth for future generations. Helen warned the audience that ‘just because you are an Isle of Man resident, it doesn’t mean you can’t be considered a resident elsewhere and you could be paying more tax as a result of your connection with that jurisdiction.’

She went on to discuss the impact of owning UK assets as an Isle of Man resident and the tax liabilities an individual could be exposed to:

‘By setting up a trust, an individual can be more in control of their assets by deciding when they will pay any tax liabilities and ensuring the return goes to the right beneficiaries.’

Senior Tax Consultant, Roy Callow then gave an Isle of Man tax update covering the position both before and after the 2018 Isle of Man budget announcement. He explained that not a great deal had changed over the last year but there were some details that would have an impact on Isle of Man registered companies:  

‘Since the Manx Companies Act (2006) became law, all distributions from resident companies are to be taxed as income, not just dividends. The alternative for drawing funds from a company is loan repayments, which don’t produce any taxable income. As a result of the budget, certain loan repayments are also treated as distributions, which has restricted the ability for new companies to create cashflow.’

He also discussed some noteworthy changes to the taxation of pensions with respect to the tax free lump sum that can be cashed in.

Senior Tax Consultant, Derek McNutt and Tax Director, Monica Dixie discussed the topic of how an Isle of Man resident finds themselves on HMRC’s radar. Derek began by discussing tax residence and the three main taxes an Isle of Man resident could have exposure to: income tax (IT), capital gains tax (CGT) and inheritance tax (IHT) and explored the ways in which they may become liable for these taxes as well as the information HMRC may already have in respect of the tax affairs of the individual.

‘Assuming you are not a UK resident, you could still have tax liabilities in the UK for several reasons. If you have recently left the UK, you may still be required to submit a tax return to HMRC. Other information may be available if you use a UK investment manager or have a bank account there, if you are a non-resident landlord or have entered into a property transaction or your details are contained on probate forms. All of these circumstances will mean that the HMRC already has information on you, which may lead to the identification of tax liabilities that you may not necessarily have been aware of.’

Monica went on to talk about the mechanisms of HMRC, how it gets your information and what it does with it:

‘With an increasing number of mechanisms and laws for information exchange and reporting, such as CRS and the trust register, it is now even easier for your information to end up on HMRC’s radar. Its intuitive system, ‘Connect’ is able to gather information from various sources and as a result it is more active in enabling HMRC to issue enquiries and write letters to individuals regarding their tax affairs. The key factor is anything outstanding that links you to the UK needs to be checked and addressed and to understand what gaps there are between what you are reporting on tax returns and what kind of information HMRC already has about you.’

Finally, Senior Tax Consultant, Glenn Cassidy examined ‘the evolving landscape of UK property taxes’ with a run through of the recently proposed changes to the taxation of UK property as a result of the 2018 UK Budget:

‘With the recent tax changes as well as number of proposals on the horizon, it is becoming increasingly expensive to invest in UK residential property. In addition to the property tax liabilities that non-UK residents currently face, non-UK corporate entities holding UK residential property will be liable to increased Annual Tax on Enveloped Dwellings (ATED) charges going forward, without providing that very valuable IHT protection for their non-UK domiciled shareholders. It has also been suggested that the rate of Stamp Duty Land Tax (SDLT) charged to non-UK residents purchasing UK residential property may be further increased, and the scope of UK CGT will be expanded to capture all UK land and property disposals and disposals of shares held in UK property holding companies from April 2019. With all of the recent changes which have taken place, and those which are proposed to take place in this area, it is essential that investors continually review their investments to ensure that they remain compliant and are fit for purpose.’

The seminar concluded with a Q&A session and closing remarks from Phillip Dearden.

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