Audit, tax and advisory firm KPMG Isle of Man hosted a packed out briefing on changes to UK tax policy at The Claremont Hotel on Monday.  More than 200 representatives of the Manx financial services industry filled the room to hear a high-level analysis of the UK’s 2013 Finance Bill, as well as a response to the scandal currently surrounding Starbucks, Amazon and other large multinational corporations operating in the UK.

A series of experts from KPMG Isle of Man addressed some of the key issues raised by the proposed wording of the draft 2013 legislation.  The event was opened by Director Gregory Jones, before Associate Director of Tax, David Parsons, provided an overview of the proposed changes in the Bill.  In particular, he highlighted the uncertainty surrounding some of the language condemning tax avoidance, such as the ‘double reasonableness’ test under the proposed General Anti-Abuse Rule (or GAAR), but said there was some good news in the area of inheritance tax planning for couples with complex domicile arrangements.  David also summarised the UK and IOM positions on FATCA compliance, as they currently stand.

Sandra Skuszka, Head of VAT Services at KPMG Isle of Man, explained some of the changes in VAT and how they may affect local businesses.  These primarily revolved around changes to definitions regarding the place of supply for services and the removal of the VAT threshold for businesses not established in the UK or IoM.  Sandie also discussed the impact of potential changes in certain key business areas, including insurance intermediary services, finance leasing and investment management and advisory.  Finally, she discussed the issuance of infringement proceedings by the EU against the UK for the inclusion of holding companies in VAT groups.

Mr. Jones then outlined some of the finer details of the Bill, including the introduction of a statutory residence test, changes to certain offshore anti-avoidance rules and the taxation of high-value UK residential property.  Overall, the tone was generally positive, with Mr. Jones describing many of the changes as ‘logical’.  He commented: “Today we have looked at a number of proposed changes that have arisen over the last couple of weeks, starting with the Chancellor’s Autumn Statement on 6th December.  One of the most interesting areas is the taxation of high-value UK residential property held by offshore companies, as we believe there will be a significant restructuring of how these properties are held in the near future to avoid some of the pitfalls of the new legislation, probably involving liquidating the offshore companies and moving to direct ownership by non-UK discretionary trusts.”

In addition to comments on the legislation, Robert Rotherham, a Senior Manager in the firm’s Tax Practice, offered a perspective on the current row over corporation tax in the UK.  He commented: “Today we considered some of the recent press coverage of US multinationals such as Amazon and Starbucks and whether or not they are paying the right amount of corporate tax.  I believe it has misleadingly been reported that they should be paying a percentage of their revenue as tax, when in fact corporation tax is paid on profits.   And in calculating those profits, there is already legislation in place regarding the ‘arm’s length rule’, which quite adequately covers inappropriate siphoning off of profits to low tax jurisdictions via inter-group management charges, royalties, interest payments and so on, so it is simply an enforcement issue.”

On that topic, Mr. Jones added: “The likes of Starbucks and Google have been vilified recently for structuring their affairs so as to avoid paying UK corporation tax.  Today we have simply aimed to dispel a few of the myths that have cropped up in the debate on this issue.”
KPMG Isle of Man holds regular seminars on issues of tax planning and changes to legislation both locally and globally.

For more information contact www.kpmg.co.im