Recent months have seen a number of changes and issues arising for the offshore life industry. The im...
The implementation of legislation culminated in April as companies put into place their answer to The Overseas Insurers (Tax Representatives) Regulations 1999. This imposes an obligation on the offshore company to inform the UK Inland Revenue of 'final events' for policies written before 6 April 2000 and full chargeable event reports for policies written after that date, for those policyholders believed (by address) to be resident in the UK. To be able to do this, systems and procedures have been changed, developed and implemented and clients informed of the company's new reporting procedures.
Companies resident in the Isle of Man, along with Jersey and Guernsey, have followed this implementation, despite last minute consultations with their respective Data Protection Offices. Companies resident in Luxembourg have had to apply to the Inland Revenue for an exemption, as the laws of Luxembourg make it an offence to pass on such information to a third party.
The second piece of legislation is The Personal Portfolio Bonds (Tax) Regulations 1999 which affects any personal portfolio bond held by a UK resident policyholder after the 6 April 2000. Such policyholders will now have an annual charge to income tax on a deemed gain of 15%. This is also considered a chargeable event and therefore reportable by the life company for policies written after 6 April 2000 but in any case, reportable for all UK resident personal portfolio bond policyholders under self-assessment. Many policyholders will have had their policies reviewed by their life company to see if their policy fell within the special exclusion provisions and if not, given an opportunity to realign the investments (if the contact permitted). Both positions necessitated each company reviewing their book of personal portfolio bond business, corresponding with clients and their advisers and issuing endorsements where necessary.
In June, the OECD published its list of jurisdictions that it considered to be 'tax havens'. Despite the vigorous arguments put forward by the Isle of Man, they were included. For the offshore life companies in the Isle of Man (Jersey and Guernsey) it has provided an 'issue' to be watched as each jurisdiction continues to argue against the listing. The OECD's motives and methodology have been called into question but at the same time, dialogue has continued in as constructive a way as possible to ensure that these particular jurisdictions are not named next year. For example, the Isle of Man has already announced its new tax strategy which it believes goes a long way in meeting the concerns of the OECD with regard to exchange of information and 'ring fenced' tax regimes where international business is given special treatment. The other jurisdictions are similarly looking at the ways in which taxes are imposed while continuing dialogue with the OECD. All parties are currently expressing their growing optimism that agreement will be reached and that these Crown dependencies will be delisted soon.
In contrast, the FSF lists the Isle of Man in Group 1. Group 1 is jurisdictions which "are generally perceived as having legal infrastructures and supervisory practices, and/or a level of resources devoted to supervision and co-operation relative to the size of their financial activities, and/or a level of co-operation that are largely of a good quality and better than other OFCs (Offshore Financial Centres)".
The aim of the Savings and Long Term Risk (SALTR) project is to raise standards in the financial services industry, "so as to build the trust and confidence of consumers and, thus, encourage many more people to make adequate long-term financial provision". The offshore life companies may decide to follow the standards and seek accreditation for their UK products, the first applications being possible in June 2001 and the first accreditations in December 2001. If the offshore company has a UK company either as parent or as part of the group they will both be considered as part of the same brand and as such, have to seek accreditation together or not at all. Where accreditation is sought, the most obvious change to the product will be in the presentation of charges, as they will need to be consolidated and set out by 'charge carrier', for example charges taken from the premium, from the fund etc. If a company does decide to seek accreditation they will also have to initiate a customer satisfaction survey the results of which will form part of the accreditation procedure.
So have these recent developments had an impact on the business written by Isle of Man life companies?
The disclosure that the company is now obliged to make to the Inland Revenue is no greater than the UK resident policyholder is required to make under self-assessment. Although there has been no effect on business volumes there is more pressure policyholders to advise the company of any change of address.
It is now more difficult to find a company that will offer a personal portfolio bond in the UK. This is in part selection against such a product by potential policyholders and as a result it is not profitable for the company to maintain such a product in their UK product range. Also for the company the cost of supplying the new chargeable event details to the Inland Revenue for negligible business levels is hard to justify.
As dialogue with the OECD continues to be regarded as optimistic and each jurisdiction seeks to maintain their position of autonomy and is mindful of the position of the offshore life companies and their policyholders, this continues to be regarded
Consistency and compliance vs. slower reaction time
Search for replacement to begin imminently
60+ £300bn ISA savings
Has technology moved on?
Total funds on list rise from 26 to 58