Phoenix :: The Marlborough Blog

This month the directors have mainly been drinking…

Written by Ben Tustin | 09th Feb 2012 | Posted in Phoenix, What the directors have been drinking | 0 Comments

Boardroom 2

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.

GAAR and SDLT – Budget Predictions

Written by Ben Tustin | 09th Feb 2012 | Posted in Budget Information, IHT, News Update, Phoenix, SDLT | 0 Comments

Flower Reception

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.

Crown Dependencies – A History Lesson

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..

VAT and QROPS

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.

Avoision – A new invention brought to you by Vince Cable

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’?

Nick Clegg – Everyone should pay a ‘fair’ proportion of tax

Written by Ben Tustin | 07th Feb 2012 | Posted in Budget Information, Corporate Tax Deduction, Phoenix | 0 Comments

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’…

Tax – The political debate

Written by Ben Tustin | 07th Feb 2012 | Posted in Budget Information, News Update, Phoenix | 0 Comments

Marlborough Reception

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.

Social Media For Regulated Industries – The Guernsey Perspective

Written by Jo Porritt | 26th Jan 2012 | Posted in Social Media | 0 Comments

This is a guest blog post by Jo Porritt from Crowd Media Ltd.

Social Media For Regulated Industries – The Guernsey Perspective

Crowd work in an offshore jurisdiction, which means a high percentage of our client base reside within highly regulated industry.  I obviously knew this when we launched in 2010, and many said to me ‘Are you bonkers? Selling innovative, social technologies as part of comms strategies for old school financial/law service providers will NEVER happen”.  I knew different.

I tend to do business instinctively; I knew four years ago that this revolutionary shift in the way we communicate, both personally and professionally, was going to hit all business sectors, albeit some sooner than others.  So my thinking and ethos may not have appeared logical looking at the landscape, but now we are positioned perfectly.  The Guernsey and Jersey marketplace has indeed suddenly realised that business is changing forever, and change, whilst difficult and frightening for many, IS inevitable.

Why?  Because it is no longer Business As Usual.  This shift has seen smaller, leaner, start-ups gaining ground that took traditional business years to achieve.  We are living in a post Industrial phase of new territory.  Everything has been turned on it’s head, anyone can become a serious player, and the balance of power that brands once levied over their target markets has not just leveled, but positively flipped.  Trust has shifted from institutions to individuals.

This has left many reeling, some literally floundering in the light of uber savvy consumers and the speed at which technology affords accessibility of information.  Marketing, PR and IT Departments battle over who should have responsibility for this shift, and often nobody wants the remit of implementing such change.  In many cases, heavy weight regulated businesses are having to make the transition from comms strategies that haven’t really changed for over 20 or 30 years.  Even the availability of high speed access to the internet hasn’t made adoption of new communication channels a must-have for regulated operators.

There are multiple reasons I have heard cited as barriers to entry, but for the most part they are:

Lack of internal support
Lack of knowledge
Lack of resources
Fear of negative sentiment and/or loss of control of brand messaging
Fear of regulators/compliance

Whilst most of these are very real to the businesses looking at the challenges adopting social strategy brings, many are perceived, not actual barriers, and often this is due to lack of education.  Where on earth do you start when there appears to be a huge list of negatives on the table?  How do you convince the decision makers there is relevance?

Internal Culture

Legacy internal culture often gets in the way of any progression, and tackling this is where you need to start before thinking about any kind of external exposure.  The results of social campaigns often impact upon multiple departments – Business Development, Sales, Marketing, HR, IT…. unless you can join up the dots within the organisation first, you can’t even begin to have a hope in hell of providing brand responses across real time channels, let alone expect any return on investment.

We’ve helped many businesses spend a lot of time looking at issues such as employee engagement, client response rates and internal communication tools as the first step in understanding how the organisational culture is structured.  This crucial step is the most often overlooked, but this important discovery phase often exposes critical gaps between inter department communication, that simply will not support any social activity, no matter what the objectives.

I would always, always, advocate you start with an internal audit.  This should not be treated as a knee jerk – “our competitors are doing this, so we should too” or bolt-on “we need a quick response mechanism”.  Take a long, hard, honest look at your business and your product and service offering.  If these are flawed, the only thing social will do is shine a huge spotlight on them. Are your customer response rates taking weeks, even months?  Imagine how this perception will shift if the same clients see you have a social presence and expect a real time response?

The misconception is that user friendly, accessible tools produce even easier results as part of a communications plan. Wrong.  This is a slippery slope to social media suicide and where you see brands having to back peddle and fire fight their way out of disaster.  More often than not, the tools get the blame, but the reality is the business should never have used the medium without the infrastructure.

Educate & Give Social Media Examples

When trying to get internal buy in, give case studies of social media successes (and fails!) from other similar business sectors.  It does not make sense to cite Starbuck’s innovative social strategy to a Law firm.  Context here, is indeed king.  Presentations peppered with tech phrases will also loose your audience.  Make business objectives relevant, just as you would for any other form of marketing.

Part of any audit before adopting social media for regulated industry should also include listening to the social web.  These sectors are the later adopters, and often by mining for keyword specific phrases, you can understand just how mature your industry is, and more importantly where you sit amongst your competitors.  Listening is fundamentally overlooked and should form part of any social media strategy, from research phase to project execution to measurement.  Many financial services or law firms are astonished at the amount of data already out there about them, their customers and their products.

Mitigating Risk & Social Media Policy Guidelines

The threat of regulators alone is enough to make most Compliance Departments say no to the mere idea of social communications.  Bear in mind that all correspondence between a business and it’s client base may be subject to regulatory guidelines.  Promotions need to be clear and not misleading, there will most certainly be a lock down on confidentiality of sensitive financial information and certain levels of advice will not be deemed appropriate.

Regulatory bodies in Guernsey itself, have not yet given guidance on the use of social channels, but the broader guidelines are certainly covered at a high level by bodies such as The Law Society – Guidelines on Social Media

and the Financial Services Authority

It is also worth remembering that technology is now accelerating at a pace that makes long winded policy processes almost impossible.  It is therefore vital that any regulated firm has relationships with those suppliers in the digital arena that really have an excellent grasp of the real time picture, and the potential legal implications this may have on any regulated jurisdiction.

The production of Social Media Policy Guidelines for Guernsey and Jersey regulated businesses is therefore essential.  This should, at the most basic level, cover staff use (internal and external), strategy, compliance and roles and responsibilities.  Your employees digital and real lives are indeed blurring, especially if you are looking at graduates and the next generation of staff you need to recruit.  How are they going to adapt to an environment that does not even understand the opportunities technology offers, when they don’t know any different?  Crowd’s Community Manager, has blogged about this here.

Why Change?

Taking into account all of the above, you may wonder is it worth any financial or legal institution even giving consideration to the use of social media?  The answer I would always give is a resounding YES.  It may well be that after the initial audit and discovery phase, your sector, particularly niche service offerings, may think there is no value in taking part.  I would bet that if you fast track as little as two years, and you carried out the same audit, the data returned would present a very different landscape indeed.

Can you really afford not to future proof your business, even when there are regulatory issues to consider?  The organisations that don’t allow regulations to get in the way will thrive above their competition.

Learn more about Crowd’s unique understanding of how to hand hold your business from brand audit right through to execution and measurement here.

Christmas Design Competition

Written by Emma Rhodes | 16th Jan 2012 | Posted in News Update | 0 Comments

Each year Marlborough has its own Christmas competition, and in 2010 our staff’s children created their own card and we posted them on the website for people to vote for their favourite.

For Christmas 2011, Marlborough invited all children from Guernsey’s school years 3 and 4 to create a Christmas themed drawing during October Half Term.

We arranged for Simon Torode, a Director from Livingroom Limited, a forward thinking local property consultant and Genevieve Langford from The Gallery, a well known local art centre to come in and help us judge each picture.  The winning design from each school was uploaded onto our website and people were given the opportunity to vote for their favourite.

Now the voting has closed and we are delighted to announce that Zoe Sneddon From Amherst Primary School won with a total of 1453 votes.  Zoe’s school was rewarded with £500 for equipment and Zoe received a canvas picture of her design.

We were overwhelmed with the response we received from the schools and we will be looking at doing something similar next Christmas.

Important HMRC QROPS Update

Written by Emma Rhodes | 07th Dec 2011 | Posted in QROPS | 0 Comments

Yesterday HMRC released a ‘consultation’ document in relation to The Overseas Pension Schemes (Miscellaneous Amendments) Regulations 2012 which will form part of the 2012 Finance Act and are due to be passed into law on the 6th April 2012. The ‘draft’ regulations detail some potentially catastrophic changes to QROPS provision that will affect, if passed as drafted, virtually every future member of QROPS. Whilst this is supposed to be a consultation document it has been released, unusually, with full draft regulations, which would certainly lead one to believe that the consultation exercise is merely a formality.

The main points of the changes are as follows:

• The current trustee reporting requirement to HMRC for benefits etc paid from a QROPS will be extended from 5 years of non-UK residency to 10 years after the member transfers out of a UK registered pension scheme

• Any distribution from a QROPS within 10 years of the member becoming non-UK resident must be reported within 60 days for every single payment or transfer

• UK residents may be punitively taxed should they be a member of a QROPS

• Third party QROPS jurisdictions (arrangements where the member lives in a different territory to their QROPS provider) will be required to withhold tax from non-resident members in the same way as they would for resident members

• All jurisdictions will have to abide by the 70% rule – to use at least 70% of the transferred value to provide an income for life

• Potential members will have to lodge an acknowledgment of any potential adverse tax consequences with HMRC before they are allowed to transfer

• UK registered pension schemes will have to notify HMRC of any member transferring to a QROPS within 30 days of transfer

• Pension schemes that are not registered for tax purposes in their country of establishment will no longer be recognised

The intention of these proposed amendments, as highlighted by HMRC, was to prevent so called busting of pensions. The main response to this is that HMRC are using a hammer to crack a nut.

The introduction of a rule requiring scheme managers to tax non-resident members in the same way as residents will massively complicate the lives of many retired ex-pats. In the past they could domicile their pension in a third party jurisdiction, receive their income gross and simply declare it on their tax return. They will now have to suffer withholding tax and offset it with the use of a double tax treaty (should one be available) to avoid paying tax in both jurisdictions. However, this will be little comfort to clients that live in zero or lower tax jurisdictions, as they will not have anything or enough, to offset.

So what can we do?

It’s important to remember that these are still draft regulations and the international community (both providers and clients) will have an awful lot to say – these regs target virtually all jurisdictions along with current & future members so there will certainly be a backlash. It is still too early to say how this will be approached but I can guarantee there will be a cohesive response from all concerned.

What is Marlborough doing about it?

One of the best things about dealing with a truly independent trust company is the speed that we can react. The draft consultation was released around noon on the 6th December, by 13:00 we were in communication with our tax advisors, by 14:00 the Board were briefed and by 16:00 we were in talks with the Guernsey Income Tax Authorities who are now in deep discussion on how to confront this unprovoked attack on legitimate QROPS providers.

Rest assured, we are very much at the coalface with this and will release regular updates as further detail emerges. In the mean time it is business as usual and we are, in fact, gearing up for a massive influx of business as the draft regulations do not appear to be retrospective thus providing grandfathering provisions for existing members, so if you have a client that is suitable for QROPS it may be best to act well before the 5th April.