Offshore tax news
October and November 2015
A round-up of local and international tax issues relevant to Jersey, Guernsey and Isle of Man businesses and individuals.
Isle of Man - Increased Tax Scrutiny
The Isle of Man Income Tax Division (ITD) has issued a notice offering guidance to Isle of Man residents who are concerned about increased scrutiny into their tax affairs, in particular their income from off-Island sources, as a result of new global information exchange regimes. The notice advises residents to contact the ITD if they believe they have submitted an incorrect tax return for any reason.
Jersey’s draft Budget 2016 presented
The Treasury Minister, Senator Alan Maclean, lodged the draft Budget Statement 2016 with the States Assembly on 20 October 2015. Senator Maclean said that all of the measures in the Budget supported the long term approach to ensuring that Jersey’s taxation system is low, broad, simple and fair.
The key changes are as follows:
- Investment holding companies will no longer be able to claim a repayment of tax by offsetting management expenses, including payments of interest, against dividends received from another Jersey company which carry a tax credit (i.e. which have been paid out of profits which have been subject to Jersey tax at the rate of 10% or 20%). Amongst other things this may mean that it is not possible to get effective tax relief in Jersey for financing costs of leveraged acquisitions and buy-outs. The new rules apply to dividends received on or after 20 October 2015.
- phase out mortgage interest tax relief from 2017 over a ten-year period
- phasing out of standard child allowance and additional personal allowance for standard rate taxpayers while maintaining the higher education allowance. This will be subject to plans brought forward by the Council of Ministers to help Islanders with the cost of child care
- reduce the £1,000 tax exemption on benefits in kind to £250
- the removal of tax relief for people not resident in Jersey who receive income from Jersey
The draft Budget 2016 will be debated by the States Assembly on 15 December 2015.
Guernsey personal tax return deadline
The deadline for 2014 tax returns is 30 November 2015. Corporate returns must be submitted online however paper returns may still be completed by individuals. A late filing penalty will be imposed where returns are still outstanding in January 2016 following a reminder letter issued by the Tax Office in December. The exemption from the requirement to file a return for those who have employment income and a small amount of bank interest only will not apply until 2016, although letters have been issued already to relevant individuals.
Guernsey’s proposed changes to Income Tax Legislation
In October The States of Guernsey announced proposed amendments to the Income Tax Legislation that will be discussed at the States meeting starting on 25 November 2015. Deloitte’s bulletin providing a summary of some of the proposed changes is available here.
Tax Information Exchange Agreements
The Isle of Man has signed Tax Information Exchange Agreements (TIEAs) with Romania and the Cayman Islands.
Non-UK Domiciliaries and Loans
On 4 August 2014 HMRC changed their practice with regard to loans taken out using previously unremitted foreign income and gains as collateral, where loan proceeds were remitted to the UK. However, on 15 October 2015, HMRC announced that such loans no longer need to be repaid by 6 April 2016 and that they will no longer seek to tax collateral where the borrowed funds were remitted pre 4 August 2014.
HMRC update their paper on FRS 102
HMRC have updated their overview paper, originally published in January 2014, designed to assist companies which are thinking of choosing or have already chosen to apply FRS 102. The paper provides an overview of the key accounting changes and the tax considerations that arise for those companies that transition from old UK GAAP to FRS 102.
Autumn Statement 2015
Chancellor George Osborne will deliver his Autumn Statement and updated forecast from the Office of Budget Responsibility alongside the Spending Review on Wednesday 25 November 2015. Following the Autumn Statement, Deloitte will be issuing their customary bulletin providing an analysis and summary of the key measures and announcements impacting individuals and businesses in the Crown Dependencies.
Deloitte will be hosting a Dbriefs webcast on 26 November at 1pm to discuss the Autumn Statement, specifically measures affecting business, both directly and as employers, an analysis of changes to the taxation of individuals and indirect tax changes. If you would like to register for the webcast, please click here.
UK publishes beneficial ownership implementation plans
At the Brisbane G20 summit in 2014, G20 leaders committed to implementing the G20 High Level Principles on Beneficial Ownership Transparency. The UK Government has now published a document setting out how it intends to achieve this. Companies will need to report beneficial ownership information to a central register. This information will be accessible to domestic competent authorities without alerting companies. It will also be publicly accessible; the public register is expected to become operational in June 2016. In 2017, the Fourth Money Laundering Directive will ensure trustees of express trusts obtain and hold current beneficial ownership information for their trusts, including the settlor(s), trustee(s) and beneficiaries. The UK will also hold the beneficial ownership information of trusts that generate tax consequences in the UK in a central register.
FATCA and the Common Reporting Standard
Transition from UK IGA to the CRS
The Governments of the Crown Dependencies have provided an update on the proposals for the transition from ‘UK FATCA’ to the Common Reporting Standard (CRS) in 2017. We have provided links to each of the notifications issued by the Governments of the Isle of Man, Jersey and Guernsey.
The Isle of Man’s Income Tax (Common Reporting Standard) Regulations 2015 were approved by Tynwald on 21 October 2015.
The draft Taxation (Implementation) (International Tax Compliance) (Common Reporting Standard) (Jersey) Regulations 201- was lodged au Greffe on 13 October 2015. The draft regulations, if ratified, come into effect on 1 January 2016.
A consultation document was published on 25 September 2015 by the States of Guernsey inviting comments by 23 October 2015 in relation to draft regulations on The Income Tax (Approved International Agreements)(Implementation)(Common Reporting Standard) Regulations, 2015.
Base Erosion and Profit Shifting (BEPS) and Diverted Profits Tax (DPT)
G20 finance ministers endorse BEPS package
The G20 finance ministers endorsed the final base erosion and profit shifting (BEPS) package during a meeting on 8 October in Lima, Peru. Read the OECD’s announcement.
The OECD Secretariat released the final BEPS package, consisting of 13 final reports and an explanatory note, on 5 October 2015.
For further information, including Deloitte’s archive of BEPS-related webcasts, please see Deloitte’s BEPS website.
DPT- The clock is ticking
Deloitte have produced a bulletin summarising who could be impacted by DPT, highlights some important upcoming deadlines for year end audits and HMRC notification requirements, as well as some practical aspects and explains how Deloitte can provide support and assistance.
OECD guidance on VAT/GST
Representatives of more than 100 countries and jurisdictions have endorsed the new OECD International VAT/GST Guidelines as the preferred international standard for coherent and efficient application of VAT/GST to the international trade in services at the annual meeting of the OECD Global Forum on VAT on 5-6 November, in Paris. The guidelines set out recommended rules for the collection of VAT on cross-border services, including internet downloads, to private consumers.
Recovery of VAT on pension scheme costs: HMRC Brief
HMRC have issued a further brief about the deduction of VAT on pension fund management costs. The Brief confirms that the current “transitional period” (during which employers and pension funds can continue to apply the “old” rules for recovering VAT on pensions-related services, as set out in VAT Notice 700/17) will be extended to 31 December 2016. It also acknowledges that there are corporation tax issues arising in connection with the use of ‘tripartite contracts’ as outlined in HMRC Brief 8(2015), and considers some alternative options aimed at enabling employers to recover the VAT incurred on pensions-related services. See HMRC’s policy paper.
Exchanging Bitcoins is exempt from VAT – CJEU Judgment
The Court of Justice of the European Union (CJEU) has followed the Opinion of A-G Julianne Kokott in the Swedish case of David Hedqvist, about the VAT treatment of exchanging Bitcoins into "real" currency (Swedish Crowns in the case). It has confirmed that the exchange of a pure form of payment (Bitcoin) for a legal means of payment (a currency which is legal tender) or vice versa is a supply of a service for consideration (the difference between the "buying" and "selling" rates) and that the supply is exempt from VAT, in the same way as other currency exchanges.
Savings taxation directive 2003/48/EC repealed
Directive 2003/48/EC (otherwise known as the European Savings Directive (EUSD)), which since 2005 has allowed tax administrations access to information on private savers, was repealed by the Council of the EU on 10 November 2015. Repeal of the directive follows a strengthening of measures to prevent tax evasion. A significant overlap had developed with directive 2014/107/EU, which amends provisions on the mandatory automatic exchange of information between tax administrations, and the repeal eliminates that overlap. The press release issued by the Council can be found here.
EU and Switzerland; EU and Liechtenstein to exchange information
The European Parliament has approved an agreement under which the EU and Switzerland will automatically exchange information on the bank accounts of their respective residents, starting in 2018. The agreement complies with the 2014 global standard on the automatic exchange of financial account information promoted by the OECD. The EU and Switzerland must now conclude the agreement in time for it to enter into force on 1 January 2017.
The EU and Liechtenstein have signed a new tax transparency agreement. Under the new agreement, Liechtenstein and EU Member States will automatically exchange information on the financial accounts of their respective residents from 2017.