Jersey and Guernsey both received praise from George Osborne, UK Chancellor of the Exchequer, for their willingness to sign up to the recent "ground breaking" tax information exchange agreements with the UK.
While there was no mention of any change of heart on Low Value Consignment Relief following the request for a partial reinstatement from the Channel Islands, the fact that the Chancellor chose to acknowledge the Islands could be a suggestion that he may be willing to look favourably upon the request.
As well as the direct mention of the Channel Islands, a number of measures announced in the speech will also directly affect the financial services industries based in Jersey and Guernsey.
The most prominent of these was the proposed introduction of capital gains tax on sales of UK residential property by non UK residents. This is an extension of the 'ATED' related charge already introduced for high value residential properties owned by companies offshore. However this latest measure will also affect individual Channel Island residents who own properties in the UK.
The Chancellor also announced a series of anti-avoidance measures, most of which are unlikely to affect the Island’s significantly. These include amendments to the UK Controlled Foreign Companies regime, changes to the taxation of partnerships and a further stiffening of the rules for disclosing schemes to HMRC. There is a challenge to 'split contracts' for non-UK domiciled individuals and an increase in the bank levy.
“The fact that the Channel Islands received a positive mention by the Chancellor in his speech is an excellent sign that the UK is happier with the Islands’ position than it has been over the past few years,” said Peter Willey, EY’s Head of Tax for the Channel Islands.
“The anti-avoidance measures announced will not have too much of an effect on the financial services industry but the capital gains tax on UK owned properties could affect Island residents.
However, I expect the commencement of this provision in an election year means that the Government will not do anything to affect economic confidence adversely by prompting wholesale disposal of residential property prior to April 2015, so I believe only future gains will be taxed. Overall, the speech was mixed in terms of its effects on the Islands. However, the importance of the positive mention should not be underestimated. This does not happen often and may bode well for the reinstatement of an element of Low Value Consignment Relief, which would be great news for the Channel Islands.”