Over 180 delegates returned to the Claremont’s Sanderson Suite for this year’s third instalment of KPMG’s ever popular UK and Manx Tax updates. Entitled ‘FATCA, UK IGAs and More’, the series of morning presentations was provided by KPMG’s tax team and featured an international tax update from guest presenter Nicola Guffogg, Assessor of Income Tax for the Isle of Man Government.
Senior tax manager, Robert Rotherham opened proceedings with a presentation entitled ‘Corporate Tax in the Press…still’. This provided a follow-up from a previous KPMG Tax Update in March 2013 during which Mr Rotherham explored the ramifications of the tax morality debate then at its height. Corporate tax, as Mr Rotherham explained, remains headline news with many more large organisations now subjected to the same treatment as Amazon, Starbucks and Google. Mr Rotherham noted that not only are the media’s published figures grossly distorted but that if excessive payments are indeed being made to foreign related parties then the issue is also necessarily one of enforcement rather than morality. As Mr Rotherham explained in closing, the demonization of corporate groups for making perfectly legal, reasonable decisions within the UK’s framework for fiscal policy is ultimately misleading, and counterproductive if the UK is to maintain a business friendly environment.
An employment tax update followed, during which tax manager Harley Richards provided a joint update on legislation surrounding both Personal Service Companies, or PSCs, and Offshore Employment Intermediaries. Concerning PSCs, Mr Richards alerted the floor to draft tax legislation, currently before Tynwald and due to be enacted in April 2014, which is designed to mitigate the risk of reduced national insurance contributions to the UK. Mr Richards identified a number of potential shortcomings throughout the draft legislation, however, observing that the case law is still constantly evolving. He then suggested a series of possible solutions and practical considerations including the proper identification of workers, employee benefits, and the creation of notional categories of individuals.
Concerning Offshore Employment Intermediaries legislation, Mr Richards alerted the floor to the recent issuance, on 14 October, of the response to a consultation document released on 30 May 2013. The aim of the legislation, he noted, is to create an Income Tax and National Insurance Contributions charge on the offshore employers of workers engaged in the UK, with particular focus on the oil/gas, IT and medical industry sectors. Mr Richards explained that enforcement presents quite significant potential for complication, observing that any default by an offshore employer will transfer the withholding obligation to any associated company, body, or agency in the UK which, for oil and gas companies, could stop only at oil field licensees and employers.
KPMG’s head of VAT services, Sandra Skuszka then provided a VAT update which offered delegates an overview of recent cases, HMRC business briefs, EU updates and anticipated changes for 2015. Of particular importance to this year’s presentation was Ms Skuszka’s summary of the European Commission’s recent proposal to introduce a new VAT returns programme which, by 1 January 2017, will introduce a standardised format and standardised, monthly reporting periods. Ms Skuszka then moved on to the UK Government’s recently announced changes to the place of supply rules. In a system that is being referred to as ‘the mini one stop shop’, from 1 January 2015 supplies of telecommunications, broadcasting and e-services in a business to customer transaction will be subject to VAT where the customer belongs. This new system is designed to level the playing field for UK organisations and, as Ms Skuszka observed, could present a significant opportunity for the Isle of Man.
Nicola Guffogg’s anticipated presentation followed during which the Assessor of Income Tax provided an overview of the international tax environment, the Isle of Man’s response, and a glimpse of issues still on the horizon. Ms Guffogg opened by outlining the implications of the 2009 OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, noting that 120 countries have agreed to adhere to a common standard of information exchange. Ms Guffogg then moved on to the G8 and related tax themes as well as the G20 leaders’ declaration of its commitment to “automatic exchange of information as the new global standard” and their call to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters “without further delay”.
On automatic exchange of information, the IOM’s response, Ms Guffogg explained, was influenced by its recognition that it was rapidly evolving into a new global standard. The Island made early commitments to intra-governmental agreements (IGAs) with the US to facilitate the implementation of the US’s FATCA legislation, and with the UK. In preparation for the implementation of the IGA with the UK a disclosure facility to be operated by HMRC was agreed in February 2013. In addition, the Island made a commitment to the G5 pilot project in May and signed the UK IGA in October.
The Isle of Man made a commitment to join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which will provide the legal basis for a wide range of assistance on tax matters, in June. Ms Guffogg noted that progress was being made towards joining and that legislation is now in place for the Convention which sets out the scope of the Convention and includes the reservations that have been made.
On the immediate horizon for 2013 is the OECD Global Forum meeting and Ms Guffogg highlighted two points to watch for. The first concerned how the Global Forum rates the first 50 countries’ implementation of the existing international standard and the second concerned how the Global Forum responds to being charged with monitoring the introduction of automatic exchange of information. Ms Guffogg also looked forward to the signing of the IGA with the US, which she anticipated would be before the end of the year. Also anticipated was further work on the implementation of automatic exchange of information as the new global standard with the introduction of a common reporting standard for automatic exchange and the technical requirements for reporting and transmitting the necessary data in 2014. In the longer term, the dates for reporting under the US and UK IGAs were noted.
To close the morning’s proceedings, KPMG’s Associate Director of Tax, David Parsons provided an overview of IGAs with particular focus on the UK, identified areas of particular concern, outlined entity classifications, alternative reporting regimes and disclosure facility obligations, and outlined the associated guidance notes. In accordance with the UK IGA, Mr Parsons explained that IOM financial institutions will be obliged to automatically exchange information on all financial accounts held by one or more specified UK persons, or held by a non-UK Entity with one of more UK controlling persons. Some areas of concern remain, however, particularly surrounding entity classifications, alternative reporting for non-domiciled persons, and multi-jurisdictional or cross border arrangements. Concerning the issuance of guidance notes, Mr Parsons explained that they are unlikely to solve many problems and that areas of uncertainty will remain. In closing, Mr Parsons advised delegates that “you do not have time to wait for perfect knowledge to evolve – you need to act now.”
Photo (l – r) Sandra Skuszka, Harley Richards, Nicola Guffogg, Greg Jones, Robert Rotherham and David Parsons
