Island financial companies have been warned they cannot rest on their laurels amid constant pressure on the work they do.

A tax expert has praised firms for the way they have continued to do well in the face of a string of demands.

Kevin Cowley, tax partner at professional services company PwC, one of the ’Big Four’ auditors, was introducing an annual tax update breakfast briefing at the Comis Hotel, Mount Murray.

He told more than 150 business people: ’I thought the theme today is really all about pressure.’

Giving an overview of tax matters impacting the island he referred to ’loads of us in the island toiling to make an honest buck, with all sorts of pressures that have faced us over the years.’

He said it started with the Americans and the FATCA [Foreign Account Tax Regulation Act] a few years ago.

’We’ve had the OECD [Organisation for Economic Cop-operation and Development] with their BEPS [Base erosion and profit shifting]initiative, the CRS [Common Reporting Standard] and the EU now coming to the party and in the background, of course ever present, is the UK looking at continuing to target what they see as offshore abuses.

’I guess it is a testament to the Isle of Man as to how well we have continued to do despite all that pressure. Because we do continue to thrive and I think part of that is the fact we are getting better at this process of educating people as to the good things that we do here in the Isle of Man.

’But then I saw a quote that we should not rest on our laurels. It came from one of the UK broadsheets in a piece about tax morality in general and there was this quote from one of its readers which said: ’’All tax avoidance should be a criminal offence.’’

’They are saying that obeying the law is a criminal offence which is a heck of a concept really. [Tax evasion is a criminal offence while tax avoidance is not]

’It just made me think that we cannot rest on our laurels, we do need to keep educating and we do need to keep spreading the message out.’

Mr Cowley referred to the recent UK Budget and said that from an offshore perspective it ’was relatively benign.’

He said that was a good thing but if you ’unpicked the details there were one or two interesting things in Mr Hammond’s Budget that will affect us offshore.’

One was a measure around offshore receipts and intangible property which he said is a ’fairly hot topic at the moment in the world of tax.’

It is aimed at large multinational groups holding IP [intellectual property] in offshore locations and ’exploiting that IP.’

The second one - ’which grabbed the headlines’ was digital sales tax.

The tax is due to come in in April 2020 ’reflecting the UK’s frustration in the slow pace of change to international tax in bringing together a framework that works in the digital era.’

He said it’s a revenue based tax on certain revenues of digital business, where they relate to UK based users.

The ’typical targets’ are search engines, social media platforms and digital market places.

Mr Cowley referred to a consultation process taking place with the UK looking at trusts.

He said the UK, as a jurisdiction, ’generally understands trusts, they understand the value of them.’

But he warned that if you look at the consultation document it quickly becomes clear that it is something of a ’fishing expedition’ designed to gather information about how HMRC can close down whatthey perceive as loopholes in use of international trusts.

PwC tax director Andrew Cardwell presented an analysis of the UK Budget - branded a ’budget of austerity’ - and spoke about the introduction of the new capital gains tax [CGT] charge for all UK real estate and its impact on non-resident property companies.

He also highlighted the detail behind a stamp duty land tax charge of one per cent for non-residents who acquire residential property in England and Northern Ireland.

The UK government is due to publish a consultation document in the new year.

Focus then switched to the proposed new EU Substance requirements for Isle of Man Companies.

Guest speaker Nicola Skillicorn, deputy assessor of Income Tax, outlined the EU listing process, how substance legislation will apply and the possible sanctions for failing to comply.

All three Crown dependencies, the Isle of Man, Jersey and Guernsey have co-operated with the Code of Conduct Group [CCG] to introduce legislation to avoid being ’blacklisted’ by the European Union.

The EU’s CCG for business taxation introduced an additional criteria of ’economic substance’, which states that financial centres should abolish regimes that facilitate offshore structures without a real economic activity.

The matter is due to go before Tynwald next month.

Under the new criteria, companies based in the Crown Dependencies, including the Isleof Man, will need to provide evidence that their activities are run in the territory, as well as being directed, managed and generating their core income in the dependencies.

Phil Morris, tax director, then hosted a question and answer session on topical indirect tax matters with another guest speaker, collector of customs and excise in the island, Sandra Skuszka.

The presentation was rounded off with a brief question and answer session with the audience.

PwC tax partner Kevin Cowley said later: ’The event was a great success, in fact it could not have been better timed given it coincided with key UK Cabinet discussions to back the UK and EU draft Brexit agreement.

’Naturally that was touched upon during the morning and generally the budget provided us with the chance to reflect on how this will affect the Isle of Man, as well as the opportunity to reflect on the tax landscape.

’PwC strives to provide value to its clients by giving insight into the business issues of the day, providing practical and business-friendly advice and assistance, and this update was just one example of how we aim to achieve this.’