IoM Warns Of External Legal Developments

by Robert Lee, Tax-News.com, London

27 July 2011

The Isle of Man Financial Supervision Commission has warned of external legislation that may affect licenceholders in the Isle of Man, including the UK Bribery Act 2010, which came into effect on July 1, 2011, and the US Foreign Account Tax Compliance Act, which is due to be phased in from 2013.

In recent guidance, the Treasury warned that, while most licenceholders are likely to be aware that the UK’s Bribery Act 2010 came into effect on July 1, 2011, they may not be aware that those who commit an offence under the act can have a 'close connection' with the UK.

The Act defines 'close connection' as:

"Section 12 (4) For the purposes of subsection (2)(c) a person has a close connection with the United Kingdom if, and only if, the person was one of the following at the time the acts or omissions concerned were done or made—

• (a) a British citizen,
• (b) a British overseas territories citizen,
• (c) a British National (Overseas),
• (d) a British Overseas citizen,
• (e) a person who under the British Nationality Act 1981 was a British subject,
• (f) a British protected person within the meaning of that Act,
• (g) an individual ordinarily resident in the United Kingdom,
• (h) a body incorporated under the law of any part of the United Kingdom,
• (i) a Scottish partnership."

The Financial Supervision Commission said: "The Commission understands that as the majority of the population of the Isle of Man are British Citizens, they could potentially be caught under the UK’s Bribery Act 2010 and commit offences under that Act. So too could any UK incorporated company operating in the Isle of Man or any other body incorporate or partnership (wherever incorporated or formed) including Isle of Man incorporated companies and partnerships operating in the UK."

Further, the FSC has alerted licenceholders of their potential liability under the US Foreign Account Tax Compliance Act, which was passed in March 2010.

FATCA requires foreign financial institutions to report directly to the US Internal Revenue Service (IRS) certain information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest. Phased implementation of FATCA will begin in 2013.

A Foreign Financial Institution (FFI) must enter an agreement with the IRS by June 30, 2013, to ensure that it will be identified as a participating FFI in sufficient time to allow withholding agents to refrain from withholding beginning on January 1, 2014.

The Commission has urged concerned parties to refer to guidance provided by the respective UK and US authorities.

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