The Isle of Man is not complacent about its reputation as a financial services centre. The private sector, the legislature and the regulatory authorities are all conscious that, to maintain its position in the offshore world, it must continually develop its legislation to enhance its products and services. Recent legislative changes reflect this.
A significant legislative development was the creation, in January, of the Isle of Man Insurance and Pensions Authority. In addition to continuing the regulatory role of the former Insurance Authority, the new organisation will spearhead a new life and non-life pensions initiative.
Until now, Isle of Man pensions legislation has tended to mirror developments in UK pensions law. But the new authority should usher in a separate and distinct legislative framework for the island.
A pensions task force has been set up to overhaul occupational and personal pension needs, both international and domestic. Consultation with the marketplace will take place soon. The aim is to create a legislative framework which offers security for investors, simplicity and yet flexibility to those offering pensions and pensions-related products to a global marketplace.
The new legislation should enable the introduction of attractive pension products which will appeal to multinational employers and expatriate employees and others who wish to take advantage of the favourable tax regime which prevails on the island.
The Isle of Man has introduced some significant legislation affecting captive insurance.
One of these is redomiciliation. Over the past 10 years, the island has become a favoured location for captive insurance companies. There is now scope for further growth in this sector. The new law allows companies incorporated outside the Isle of Man to redomicile on the island.
The option is attractive to UK groups with captive insurance companies in Bermuda. As well as the obvious time and cost savings as a result of captive board meetings being held on the island rather than on Bermuda, there are potential advantages in the context of controlled foreign company legislation.
Recent changes to the UK-controlled foreign companies legislation mean that a UK group with an offshore insurance subsidiary may suffer adverse tax consequences unless that subsidiary pays tax in its place of domicile which amounts to at least three-quarters of that to which it would be liable if it were resident in the UK.
To enable Isle of Man captive insurance companies to pay enough tax in the Isle of Man to avoid these consequences, such companies are now eligible for registration as international companies, which may elect to pay tax in the Isle of Man at a higher rate than the standard 20 per cent corporate tax rate.
The ability to become an international company – and thus sidestep aspects of the UK controlled foreign companies legislation – makes the island a more attractive location for captive insurance companies than jurisdictions such as Bermuda, where no tax is levied on such companies and there is no opportunity to mitigate the effects of controlled foreign companies legislation.
It is therefore expected that a number of companies domiciled in such jurisdictions will seek to take advantage of the newly-created opportunity to redomicile on the Isle of Man.