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Income Tax AmendmentNo 2 Bill 2004 15th November 2004

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Allowances for Non Residents. Change to Income Tax (Amendment) ... Aggregation of income, deductions, allowances and reliefs. Documents issued in joint names ... – PowerPoint PPT presentation

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Title: Income Tax AmendmentNo 2 Bill 2004 15th November 2004

1
Income Tax (Amendment)(No 2)Bill 200415th
November 2004
Practitioners Seminar
2
Arrangements

Fire Exit
Mobiles turned off please
Copies of Slides available
On ITD website
Or leave a Business card
Health Warning subject to Legislative process

3
Introduction - Purpose of meeting

Opportunity to meet Malcolm Couch
Tax Strategy update
Background to the next Bill
Inform on proposed timescale for the next Bill
Opportunity to consult / discuss
Details of the last Act e.g. Accounts basis
Policy within this Bill e.g. Distributions

4
Agenda

Taxation Strategy update Ian Kelly
Where are we up to?
Next Steps
Framework of IT (A) (No 2) Bill John
Williamson
Land Transactions
Taxation of Non-residents
Married Couples Alice Martin
Undistributed profits Ian Kelly
Personal Introduction Malcolm Couch
Questions Panel
Close Ian Kelly

5
Taxation Strategy Update

Oct 2000 Taxation Strategy approved by Tynwald
Oct 2002 Modified for Code of Conduct issues
Oct 2003 Exchange of information
May 2004 EU Savings Directive

6
Income Tax Legislative Programme

Tax Strategy Aims -
Modernise the Income Tax System
Satisfy International Obligations
Simpler
Fairer
Protection of the Revenue

7
Legislative Programme

Income Tax Act 2003
Income Tax (Amendment) Act 2004
Income Tax (Amendment) (No.2) Bill 2004
EU Savings Directive
Corporate Tax Bill
Pensions
Consolidation

8
Tax Strategy Update

Next Steps
Continue domestic changes
Reduce taxation for companies
General fee for companies
Corporate Tax
Removal of harmful practices

9
Income Tax (Amendment)(No. 2) Bill 2004

Transactions in Land
Taxation of Non Residents
Married Couples Treatment
Undistributed Profits
Rates of Tax
Discounts
CT Annual Charge
Temporary Tax Order confirmation Lower rate for
companies
Miscellaneous amendments

10
Transactions in Land

Policy - Land is a national asset
Protect population from speculation
Avoid quick fix development
Everyone should benefit when value increases
Protect revenue take regarding trading in
property
Stability of property market

11
The Proposed Mechanics

Retain current charging provision
Section 2
Onus on us to prove trading income
Income Tax (Amendment) (No 2) Bill 2004
New schedule
New charging provision gain treated as income
3 cases A, B, C and ability to prescribe D
List of circumstances outside the scope

12
Aim to charge

Property Developers who do not hold the land for
7 years
Persons who do not hold the land for five years,
unless they have lived in the property as only or
main residence for last 18 months
Persons escaping a charge because they have lived
in the property for 18 months, however they
cannot meet financial commitments (living on
development profits)
Ability to define further charge by Treasury
Regulations if necessary

13
Outside the scope

Otherwise chargeable
Personal representative disposing of deceased
persons land
Inherited property
Leaving the Island (to take up employment
elsewhere)
Disposal outside their control
Disposal by Board, Authority, Crown or charity
Business property

14
Computation

Part of normal assessment
Treated as trading income but no Class 4 NIC
Proceeds less expenses reasonable for a trade
Cost / MV
Valuation fees
Estate agents fees
Advertising
Legal fees
Enhancement expenditure

15
Key Issues

Clarity over Land
Contracts within the scope
Date of disposal
Signing / exchange / money exchanges hands
Disposal outside their control
Loss relief
Reporting requirements advocates?
Clearance procedure for certainty

16
Taxation of Non Residents

Restriction of liability of Non Residents
UK S 128 concept
Allowances for Non Residents
Change to Income Tax (Amendment) Act 2004 rules

17
Married Couples

Consultation Document issued Oct 2003
How to update the legislation to -
Make it compatible with European Convention on
Human Rights
Improve fairness and equality of treatment
Retain benefits of aggregated treatment
Should other couples be included?

18
Married Couples

Feedback
Most supported continuation of joint treatment
Some favoured application to married couples only
More flexibility over time limits for elections
Keep it simple

19
Married Couples

Specific Issues
Respect confidentiality of married couples,
unless they decide differently
Burden of taxation should not fall on one partner
Payments or repayments should be made to the
individual or couple as appropriate
Increase time limits for election process

20
Married Couples

Independent treatment, or
Election for joint taxation
Aggregation of income, deductions, allowances and
reliefs
Documents issued in joint names
Both signatures required on return forms
Named partner for correspondence cheques
Partners will be jointly and severally liable

21
Married Couples

Election conditional upon both being
Resident at start of the year and for the full
tax year
Married and living together for the full year
New resident rules
Independent in year of marriage, separation or
death
Transfer of unutilised allowances on
Marriage
Death
Transitional provisions

22
Distributable Profits

Why do we have to do anything?
2 Regimes
Code of Conduct compliant
Protect the domestic tax base
Mixture of Primary and Subordinate legislation
Maintain competitiveness Taxation Strategy

23
Distributable Profits

Distributing companies
Tax credit equal to rate of tax paid by company
Non-distributing companies
Deemed distribution
Distributable income
Taxable income e.g. includes Capital Allowances

24
Distributable Profits

Clubs Associations outside the scope
Investment company 100 distribution
Trading company
Distributing company - basic test
Non-distributing company 60 _at_ 18
10 rate companies
Rental income, property development

25
Distributable Profits

Consultation
Definition of distributing company
Averaging, start ups
Administrative issues
Tracking dividends, returns, payments
Share Options
Anti-avoidance
Differential share regimes, winding up,
liquidation

26
Personal Introduction

Malcolm Couch started work with the Income Tax
Division on 1 November
He is working alongside Ian Kelly until the end
of November
A combination of Ians support and the strong
(and recently augmented) management of the
Division will ensure a smooth handover

27
Personal Introduction

During a 15 year career in tax, Malcolm has
gained wide experience in both the public and
private sectors, and at the international level
His most recent role was with Shell as a tax
manager in their North Latin America and
Caribbean region

28
Personal Introduction

At a time of many challenges, the Income Tax
Division remains committed to delivering change
professionally within the context of the
Governments Economic Strategy 2004
Consultation with the professions and industry
continues to be a vital part of the way that we
operate

29
Personal Introduction

Malcolm is delighted to have been appointed as
Assessor and is looking forward to playing his
part in ensuring the future prosperity of the
Island and its people
He is married to Caroline, and has two young
children who are now happily in school

30
???????
QUESTIONS
31
Close