The loophole in question which allows properties to be owned by companies which can then be sold attracting zero stamp duty has cost the UK government an estimated £1 billion in revenue. When you look at the figures in detail you’d see that there are currently 92760 houses, mansions and castles in the UK that have been transfered to the ownership of offshore companies. These properties with a combined value of around £200 billion are owned by companies in 122 countries but to the Isle of Man’s credit (if that is the right word) they come out way on top of the list with 23147 properties registered to Manx companies since 1999.

It will be interesting to see how the UK Conservative government tackles this issue as you’d have to imagine a large number of their supportes and even members could be affected by this. George Osbournes recent interview for the BBC did perhaps give some insight in to what is planned, his use of “house you live in”, over and over does seem to give some clues as to who will and who won’t be affected by the plans to close this loophole.

What people should keep in mind is that this isn’t some form of attack on the offshore finance centres. It’s simply the UK Government exercising its rights to set tax laws as they see fit. In the same way that any individual isn’t obliged to pay more tax than the current legislation determines the powers that be have the right to amend that legislation as they like.

Properties worth more than one million pounds could potentially find themselves in the firing line and, according to the press in the UK, business secretary Vince Cable may bring the issue up during a speech on executive pay due to be made later this week.

Mr Cable told the Sunday Telegraph that foreigners buying expensive properties but not paying stamp duty was ‘perverse’. He didn’t feel the need to share opinions of people buying foreign property using UK financial structures though. The proposed move would see a 1% annual levy on all property worth over £1 million.

This has come on to the agenda again because according to figures from the UK, the total value of properties registered in the Isle of Man and the Channel Islands has rose almost a third in the last 2 years.

It’s a serious point, when the UK press gets its knickers in a twist over offshore bank accounts and secrecy jurisdictions Monaco has never got a look in until today. Even then the press has only mentioned Monaco in a passing fashion, there has been none of the micro analysis, “tax haven” bashing that offshore centers closer to home enjoy. Also part of the whole deal was a company based in Miami but again this has only got a passing mention. If this company happened to be setup in the Channel Islands you could be sure we’d have been treated to a double page spread by now.

With so many apparently world class places to hide your money dotted around the UK, one of which the BBC would have you believe you can just set up an untraceable trust willy nilly, why would you choose to deal with Monaco? Maybe it’s because these white listed, well regulated jurisdictions aren’t quite such an easy place to hide money as people would have you believe? If you took the time to look who found themselves in the initial OECD Grey List compared to those White Listed jurisdictions you might just be surprised.

It seems that no matter how compliant certain jurisdictions try and then become some UK politicians can not get their heads around the idea of competitive tax rates. It’s a strange one because in so many ways the UK offers citizens of the rest of Europe what the Isle of Man, Jersey and Guernsey offer people from the United Kingdom. Don’t even mention UK LLP. These aren’t places where you go to hide, they are simlpy places that offer better tax rates.

There are countries in the world where there are very few natural resources to exploit, little that can be exported in order to support a population. In some cases these places take the choice to offer incentives to individuals and businesses by competing in terms of taxes. This is NO DIFFERENT than 2 shops choosing to set their prices differently and wouldn’t it be a dull world if everywhere was the same? In a global market countries are competing with each other for a finite amount of business, this is the way the world works. The UK in particular has some strange aversion to this notion of competition, especially so since the last Labour government managed to bring the United Kingdom to the brink of doom.

One wonders how long it will be until independent states find themselves rolled back into the UK all in the name of stopping people from legally reducing their tax burden?

Sean Costello has been leading Jersey’s efforts in India and has reported that there is huge interest in wealth management in particular. Jersey is a great gateway for wealthy Indians looking for investment opportunities further afield as well as structured investments. This all bodes well for the future as Jersey are establishing themselves in this massive market ahead of their offshore rivals.

Following up these three the continued force of Asia is still dominant with Singapore, Shanghai and Tokyo all doing well. Reinforced by the most improved financial centre in this report – Seoul. Seoul has not only improved its ranking significantly but also its rating, some achievement when you see how ratings have dropped for other centres. The importance of Asia just cannot be underestimated and it is also prominent in the report looking at where companies are likely to open new offices. The top 6 spots are all filled by Asian cities with London only just scraping it into the top 10.

The offshore centres have seen a continued decline in this report with the Isle of Man falling further behind Jersey and Guernsey in overall ranking and rating. The 3 crown dependencies continue to fill the top 3 spots for offshore financial centres but a historical look clearly shows how mounting pressure has seen a decline in “offshore”. This is only likely to continue what with the recent UK budget looking to place the UK mainland in more direct tax competition with the dependencies.

These are just some of the brief highlights of the report and the complete document comes in at 44 pages long. It’s a very worthy read, you can view the complete Global Financial Centres Index 9 (2011) by following the link (Right click Save As.. to save a copy to your hard disk)

ARI or the Atrribution Regime for Individuals was brought in as a way of stopping Manx residents from holding income in companies (that are taxed at zero percent). It required a distribution of profits for Manx shareholders.

The trouble is that ARI was put in place to replace the DPC (Distributed Profit Charge) after it was ruled against be the EU code of conduct group. Prior to this the Isle of Man governments rhetoric about DPC was that it was outside the scope of the OECD because it was a personal tax matter. Doesn’t that sound very similar to how they were talking about ARI right up until a couple of months ago? The message definitely doesn’t seem to have sunk in.

Perhaps more worrying for Isle of Man CSPs is that the Treasury Minister has already made a commitment to replace ARI with something similar! At what point is Europe going to get fed up with the Isle of Man’s attitude in this regard? It seems to be a clear choice of 2 options. Either something is put in place which disadvantages Manx residents (and as such will be deemed harmful) or the island gives in and introduces something which affects all shareholders equally? We all look forward to seeing what that may be.

The OECD And Zero 10 Tax

The Isle of Man was the first of the crown dependencies to implement zero 10 and in all honesty there was very little issue raised. It was checked and found to be fine. It was only then when Jersey and Guernsey wanted to compete on a level playing field that Europe started to take notice. The result of this was that Guernsey has steered in a direction looking at alternatives whilst Jersey has ploughed ahead following the IOMs lead. Because of this the OECD is now taking an active interest in Zero/10 and reviewing it for harmful effects.

It’s not looking great for these offshore jurisdictions:-

“Following that meeting, UK Treasury released a statement suggesting that the European Commission and the Code of Conduct Group had deemed the island’s new tax legislation gave rise to ‘harmful effects’.”

Earlier this month Guernsey reported such and suggested that both Jersey and the Isle of Man would need to look for an alternative corporate tax regime. This was strongly rebutted by the Treasury Minister on the Isle of Man, Anne Craine. She has insisted that the European concern only relates to the ARI element of Zero/10 (ARI ensures that residents are made to distribute profits which then become taxable as personal income). The Manx Treasury are adamant this is a personal tax issue and is beyond the remit of the Code of Conduct Group. Jersey to their credit seem to be keeping more of a watching brief.

In what could easily become a game of tit for tat it seems that the Guernsey view is closer to what the UK is looking towards with its offshore dependencies. Lord McNally was recently quoted as saying “‘We’ve not made any secret, and certainly Her Majesty’s Treasury has not made any secret that they do not think that the tax regimes pursued by Jersey and the Isle of Man are compatible.” Of course you can’t forget that the Isle of Man and Jersey are in competition with the UK in terms of attracting business. Structures such as the UK LLP are just as “beneficial” as anything to be found offshore so it’s obviously in the UK’s interest to slow their competitors as much as possible.

The big question is when the dust settles and something solid comes from all this where will it leave the Isle of Man and Jersey in terms of their corporate tax regimes and the finance industries that rely so heavily on competitive tax arrangements? Nobody can say for sure.

A CSP Will Be Able To Guide You Through The Process Of Buying Property In The UK

The United Kingdom is also a tax haven for non resident individuals and investing in the UK property market through an offshore company can reap amazing tax savings!

The United Kingdom is an excellent location to invest in property – and through an offshore structure the tax liabilities can be reduced – particularly effective if purchasing the property – but also beneficial if transferring your existing property into an offshore ‘umbrella’ structure.

The property will be held in a tax effective jurisdiction (typically a British Virgin Islands or Isle of Man company) and the shares held in Trust for the owner. As the property is owned by an offshore company that is managed and controlled offshore – a number of tax benefits can be applied. The property can also be rented (upon application to the Inland Revenue as a non-resident landlord).

Such benefits of the structure include:

* Zero Capital Gains Tax – on the sale of the property no tax will be paid on the capital gain.

* Zero Inheritance Tax – the property would not pay any inheritance tax in the estate of the ultimate owner.

* Zero Stamp Duty – in certain cases stamp duties on the transfer of the property can also be mitigated.

Income tax arising from the rent of the property may also be reduced against interest paid on a mortgage and other deductable charges.

The structure is suitable for non-domiciled and non-UK taxpayer’s who wish to take advantage of the excellent return of rental income and the potential growth of UK property

The members of the Rolling Stones (Mick Jagger, Keith Richards and Charlie Watts) utilise the benefits of offshore Trusts to ensure they pay only 1.6 percent of all income earned. They keep 98.4 percent of all their income! (Including from the highest grossing performance of all time – This according to the Dutch documents recently published detailing their tax affairs and the offshore structures involved).

Fantastic news for them – but it’s not only the rich & famous that can utilise offshore structures to save tax. There are many opportunities for an up-and-coming business or moderately wealthy individual to minimise their tax requirements and protect their assets from litigation or economic instability.

While it may not be possible to reduce your tax bill down as low as 1.6 per cent (unless you become a tax nomad and exile yourself from your home country) it is entirely possible for people like you and me to have an offshore Company or Trust within a financial management strategy to reduce taxes, protect your estate
and protect your assests in a legal and confidential manner!