Wendy Martin, EY’s Channel Islands Head of Tax, highlights the key points from the 2017 Autumn Budget that will have an impact on the Channel Islands
On the face of it, UK Chancellor Philip Hammond’s Budget seemed to be a boring budget with little impact on the Channel Islands. However, as always, the devil is in the detail and there are a number of measures that are of particular relevance to individuals and businesses in the Channel Islands.
Changes to taxation of UK property
From April 2019, it is proposed that UK tax be charged on gains made by non-residents on the disposal of any immovable property in the UK. A consultation has been issued on the application of this change alongside anti-forestalling measures to prevent avoidance of this charge. It is therefore considered likely some version of these measures will be introduced from April 2019.
The rules will create a common regime for disposals of residential and commercial property. Disposals of commercial property by non-residents currently enjoy an exemption from UK capital gains tax. The stated intention is to ‘reduce the incentive for multinational groups to hold UK property through offshore structures, often in low tax or no tax jurisdictions’.
In addition, it is expected that ATED-related capital gains tax and non-residents capital gains tax (NRCGT) on disposals of UK residential property will be reformed to be consistent with the proposed change. One measure expected to take effect from April 2018 is the abolition of the exemption from NRCGT for ‘widely-held’ entities.
The government also intends to continue with its plan to bring corporate non-resident landlords into the scope of corporation tax. This will apply from April 2020.
Finally, to encourage properties to be rented out, rather than held simply for capital appreciation, there will be increased council tax on empty properties and increased ATED (annual tax on enveloped dwellings) rates.
These are significant changes and further information will follow as the UK government issues more detail.
Other key measures
Other key measures for individuals and businesses on the islands are as follows:
• An increased time limit, effective April 2018, for HMRC to go back on offshore non-compliance cases from a minimum of six years to a minimum of 12 years
• A consultation in 2018 on changes to the taxation of trusts
• A consultation response to be published on 1 December regarding the disclosure to HMRC of offshore structures, and of those using them
• Reform of penalties for the late payment of tax and late submission of returns