Written by
Ben Tustin | 09th Feb 2012 | Posted in
Phoenix,
What the directors have been drinking |
0 Comments
Nick has been quaffing Meursault and has discovered that the highly prized Comtes Lafon wine producer has just acquired some vineyards in Macon and the likes of Clos de la Crochette are far more reasonably priced than their more famous offerings.
Adrian has mainly not been drinking red wine as unfortunately he has recently realised that his lactose intolerance means that he has an allergic reaction to most reds. It appears that there is a lactose product used as a thinner that is causing the problem. Ben is secretly quite pleased about this turn of events as he has inherited Adrian’s stock of red wine.
Dave has mainly been drinking Gluhwein as he is skiing in the Alps at present, we are fairly certain that he would have had a couple of small beverages to celebrate his birthday this week.
Written by
Ben Tustin | 09th Feb 2012 | Posted in
Budget Information,
IHT,
News Update,
Phoenix,
SDLT |
0 Comments
Continuing on the practical theme regarding the UK approach to offshore tax planning I am taking the unusual step of making a budget prediction for 2012. Cleggy, Compo and Foggy have been after a General Anti-Avoidance Rule (GAAR) for many years and I strongly suspect that we will either see a full blown GAAR or at the least a consultation on the introduction of such a rule at the next UK budget. It would make sense that the UK follow the Irish GAAR route that was introduced in 1989 and in terms of reduction in offshore planning the GAAR should have an immediate effect. What I question is whether a GAAR will a) encourage tax evasion, and b) push wealthy individuals and entrepreneurs out of the UK to spend their money and pay their tax elsewhere.
My second prediction for the budget is that HMRC will attack offshore companies owning UK property. A massive proportion of London property over £1M is held in offshore companies and HMRC want to ensure that upon a transfer of ownership of these companies SDLT should be payable. The Liberal arm of the coalition want to take this further and ensure that inheritance tax is payable upon the death of the beneficial owner. The question is how they achieve this. The answer is simply follow the Spanish model that was introduced a few years ago whereby the transfer of a beneficial owner must be notified to the revenue and if it is not then that is a criminal offence. If this law is implemented in the UK it will have a dramatic impact on real estate values, more particularly if the IHT look through is enforced, and as such I would expect to see a possibly significant downward trend in external UK property investment. As indeed happened in Spain.
I would welcome your comments on this missive (either on or offline) and look forward to an entertaining discourse.
Written by
Ben Tustin | 09th Feb 2012 | Posted in
News Update,
Phoenix |
0 Comments
The constitution of Guernsey was shaped by events of 1204. The island had been governed as part of Normandy. In that year, the English lost mainland Normandy and the Channel Islands were all that they held on to. But English kings still continued to govern Guernsey according to long standing arrangements, and even today Guernsey law remains fundamentally Norman – adjusted to the modern situation – in many respects. So, the island is not, and has never been, part of the United Kingdom.
The constitution and history is long, varied and very interesting, I would recommend reading the following book The Government and Law of Guernsey (2005, with a new edition promised for this year) by my good friend Dr Darryl Ogier to understand the fundamental changes that have affected this part of the British Isles (not, I will repeat, part of the UK) over hundreds of years (I am not on commission!).
That’s the history lesson over but what does our constitution mean now in practical terms? We are dependent on the UK for defence and foreign policy – that of course worked wonderfully well during the second world war when the Channel Islands were occupied by the Germans and only liberated a day after VE day. To digress for a moment, I can confirm that shooting on a new film of the book ‘The Guernsey Literary and Potato Peel Pie Society’ starts in Guernsey in spring 2012, starring Kate Winslett and directed by Kenneth Branagh. It is a love story set during the aforementioned occupation. The industry body that was instrumental in enabling the film to be shot in the island is Guernsey Film (co-chair: Ben Tustin!) and unsurprisingly Guernsey Tourism and our government are very happy that the film is to be released with the title ‘Guernsey’.
Digression over, it is clear that the Channel Islands have generally adopted UK laws and this is perhaps why the coalition assume that they can ‘close us down’. The reality is that we are constitutionally distinct from the United Kingdom and, if required, Guernsey can unilaterally declare independence from the UK (albeit after a plebiscite). Although there is no fiscal difference to Guernsey’s status whether it be independent or not, were the crown dependencies to go down this route we would then be treated as the rest of the world form a UK perspective and I must admit that I can see little disadvantage in that. Watch this space..
Written by
Ben Tustin | 08th Feb 2012 | Posted in
HMRC,
Phoenix,
QROPS |
0 Comments
Less pontificating, let’s get practical – what have the UK government done so far to attack offshore jurisdictions? The removal of the VAT exemption on importation of low value goods was clearly targeted at the Channel Islands and particularly as Amazon imports goods via Jersey and HMV via Guernsey. Was this removal of the exemption the wrong thing to do? I don’t think so. Although I have criticised the use of the word ‘loophole’ in tax planning it was always clear that this was a loophole and was being abused by the large corporates. I am sure HMV and Amazon are now wondering why they bothered establishing massive warehouses in the Channel Islands without taking Dave Hartnett out for lunch first.
Of greater concern was the recent amendments to the QROP legislation. Guernsey is the largest provider of Qualifying Recognised Offshore Pension Schemes for ex-UK residents in the world and in December HMRC amended the rules that allow a QROPS to have qualifying status. In their own impact note which accompanies the amendment they admitted that it would bring no extra revenue into the Treasury. Furthermore, the new rules still allow ex-UK residents to transfer registered pensions to New Zealand even though that jurisdiction effectively allows pension busting if the member can prove financial difficulty.
The QROPS amendments are concerning for 2 reasons:
If anyone wanted evidence that the UK is becoming more like the US in trying to police its citizens wherever they are in the world then this is it. The use of QROPS is intended only for those who have left or intend to leave the UK so why try to stop them using the Channel Islands even if they are not in the UK?
Secondly, of greater concern to Guernsey is that this is a clear attack on us as a jurisdiction by the UK government. Perversely I am actually rather pleased that HMRC made this changes with, I assume, no previous discussion with the Guernsey Income Tax Office. The reason for my pleasure is that now, as far as the Crown dependencies are concerned (I shall come back to the term Crown dependency later), the gloves are off. Guernsey has already drafted legislation in record time to provide a pension scheme that will meet the new qualifying requirements set down by HMRC. As mentioned previously this will NOT have a detrimental effect on UK tax take but will allow non-UK residents to site their previously UK pensions in a politically and economically stable environment – something that cannot be said about dear old blighty.
Written by
Ben Tustin | 08th Feb 2012 | Posted in
Budget Information,
HMRC,
News Update,
Phoenix |
2 Comments
Let’s get this straight – tax evasion is illegal, stupid and irritates professional tax advisers; tax avoidance is legal and does not involve utilising ‘loopholes’ as the media often like to portray it. Legitimate offshore structuring for tax and commercial reasons has been used for decades by the wealthy in order to prevent taxation on funds that are, generally, not remitted to the UK.
Let me make this abundantly clear – tax evasion is stupid and annoying. UK residents who have offshore bank accounts or structures without any professional advice or legitimate planning are very very silly and deserve everything they get in terms of penalties and possible criminal charges. I would rather all offshore jurisdictions are entirely transparent as far as these types of people are concerned as their bad business practices and bad reputation tarnishes us all.
Tax evaders set out to avoid a legitimate tax charge by breaking the law and we commend the Revenue of any jurisdiction by clamping down on this activity. Maybe the Crown dependencies have been too lax on coming out and stating that tax evasion is not acceptable? This is something that we are working on here from a political standpoint so watch this space…
The coalition government, HMRC and HM Treasury have undertaken an orchestrated campaign of words over the last 2 years whereby spokespeople intentionally interchange the words ‘avoidance’ and ‘evasion’ so that the public and media assume them to be one and the same, i.e. illegal.
I have some respect for HMRC given this campaign seems to be working; and where that is not enough they tend to make sweeping statements about ‘closing down’ offshore jurisdictions which rattles the cages of potential clients and scares them into not investigating the types of legitimate tax planning that can be used (dare we mention Philip Green or indeed the Virgin beardy himself?). Whatever happened to the judicial statute of ‘certainty for the taxpayer’?
This is a fascinating moral argument that Cleggy is using (I’m thinking of renaming Vince Cable as ‘Compo’ and Danny Alexander as ‘Foggy’). What is ‘fair’? Surely to be truly equitable everyone should pay the same percentage of tax, flat rates of tax work in a number of jurisdictions around the world and in places like Estonia where the professional classes and high net worth individuals do not object to paying what they consider a fair proportion of tax.
Here in Guernsey we pay a flat rate of tax at 20% (above a suitable personal allowance) and virtually no one attempts to avoid this as it is felt this percentage is a reasonable amount to pay for the services that we receive. Were the UK to move to a flat rate then it has been mooted in Whitehall that the actual tax take will increase, not from the lower earners, but from encouraging higher earners to pay the full amount. This may be the most effective weapon a UK government could use against offshore tax havens. Controversial but true.
A personal view on what is fair: Both my parents were teachers for their entire working lives, they paid income tax and national insurance on earnings. Any investments they managed to make, after squirreling away hard earned cash, were taxed to capital gains tax and they paid VAT on everything they brought. Does Cleggy think it is fair that when they die they will also pay 40% inheritance tax on any assets over £325k that they own? The only reasons that they have assets over this value is due to hard work providing an education to the children of Kent, being very careful to save and never getting into manageable debt. I invite Cleggy to come and talk to me about ‘fair’…
Written by
Ben Tustin | 07th Feb 2012 | Posted in
Budget Information,
News Update,
Phoenix |
0 Comments
So Ed Miliband thinks that £2.4Bn can be raised for the exchequer if the UK ‘closes down’ its offshore tax havens. Nick Clegg has always wanted to stop ‘harmful tax practices’ and believes that everyone should pay their ‘fair share’ of tax. Vince Cable wants to launch a tactical nuclear strike on the Channel Islands. So what are we to make of all this political posturing and big statements?
£2.4Bn will be raised if UK offshore tax havens are closed down
A very good friend of mine once referred to offshore jurisdictions using the analogy of a semi-inflated balloon, if you squeeze one part of it all the air shifts to those areas that aren’t being squeezed. This is a highly accurate picture of what happens when pressure is applied to restrict the activity of any offshore jurisdiction. If the Crown dependencies are targeted then tax planning will go further afield and most likely to the Caribbean jurisdictions which are not as highly regulated and where it is far more difficult for Western countries to apply pressure.
The reality of modern living is that the wealthy will simply not tolerate very high levels of taxation, jurisdictional mobility now allows families to choose when and where to pay tax and therefore if they cannot tax plan to avoid excess tax then the UK may lose out completely; and rather than increasing the tax take it will actually decrease. In addition the UK will then lose out on inward investment and spending from wealthier individuals as they take all of their money elsewhere. I am not suggesting that the wealthy pay no tax in the UK (and indeed the vast majority pay substantial amounts currently) but even those that tax plan offshore tend only to do so with wealth that they are not actually spending in the UK. The main objective for the wealthy is to pay a ‘fair’ amount of tax.
