British Offshore Tax Haven Update

The UK has a number of tax havens associated with it – from Jersey and Guernsey in the Channel Islands to the Isle of Man and even Gibraltar. All are jurisdictions closely associated with mainland Britain, but which have a certain autonomous status allowing them to make their own rules when it comes to the likes of taxation for example.

In the past these particular British offshore tax havens have been among the most well respected in the world within the financial services industry because of the degree of regulation in place protecting investors’ assets etc. However, the collapse of Kaupthing Singer and Friedlander in the Isle of Man really undermined British tax havens in general, and called into question the scope of investor protection schemes and the degree of regulation in place too.

As a result of this fact, combined with elements such as the EU Savings Tax Directive and the global crackdown on tax evasion, all tax havens around the world have been forced to reassess their position and how they handle the management and protection of invested assets on their shores. Most recently this has led to significant changes in the Isle of Man and Gibraltar. Here we present a British offshore tax haven update so you can determine where your money will be best invested and protected.

Looking at Gibraltar first, it has been undergoing a 14 year long series of changes to its taxation legislation to make the transition from tax haven to European financial services centre, and according to authorities there, it is on track for completion of this transition in due course. Among final changes being made are the reduction of corporation taxation from 22% to 10%, and the abolition of the tax-exempt company structure.

The changes within the jurisdiction have led to a significant number of companies relocating away from Gibraltar over the past few years, as they feared the scope of the changes and how they would affect their operations. However, the purpose of the changes is clear, Gibraltar wants to be respected as a financial services centre of repute rather than a tax haven with a ‘dodgy’ reputation!

Next let’s examine the Isle of Man – they have responded to the EU Savings Tax Directive by agreeing that from next year all affected individuals will be subject to the automatic exchange of information rules of the Directive, rather than the previously optional withholding tax option. The automatic exchange of information was the ultimate aim of the Directive of course, and in order to become better respected and to lose their tax haven status, the Isle of Man have complied with this requirement earlier than some expected it to.

There are still a few issues in place that hamper the Isle of Man in its progress towards achieving the position of respected financial services centre in Europe however, such as its position on corporate taxation. Certain company structures and businesses receive preferential rates at the moment – and this is a subject under scrutiny and facing debate.

Finally, an extension of the scope and remit of the EU Savings Tax Directive is currently under debate in Europe – we will of course update you as and when changes are announced. However, as it stands, there are solutions available – such as portfolio bonds for example – that can shield and protect some investors from the scope of the current Directive. If you would like to know more based on your own personal position, feel free to get in touch and we will find a wealth management adviser in your area who can advise you.

Offshore Pro Group