Wendy Martin, EY’s Channel Islands Head of Tax, examines the impact on the Channel Islands of Chancellor Philip Hammond’s first and final Spring Budget before the permanent move to Autumn Budgets later this year
As expected, there were few significant announcements in this week’s Budget – Philip Hammond had already noted that the Autumn Budget would be the main policy event for the year.
The measures likely to be of most relevance to the Channel Islands are as follows:
• The government stated that it will be introducing a 25 per cent charge on transfers to QROPS (qualifying recognised overseas pension schemes). This charge is targeted at those seeking to reduce the tax payable by moving their pension wealth to another jurisdiction. Exceptions will apply to the charge allowing transfers to be made tax-free where people have a genuine need to transfer their pension, including when the individual and the pension are both located within the same country or within the European Economic Area. The changes will take effect for transfers requested on or after 9 March 2017.
• As previously announced, the government will consult on bringing non-UK resident companies – which are currently chargeable to income tax on their UK taxable income, and to non-resident capital gains tax on certain gains – within the scope of corporation tax. This will potentially affect non-resident landlords in the Channel Islands receiving UK rental income.
• Some changes were announced to the draft legislation restricting relief for corporate interest expense and the use of corporation tax losses. However, there are other points on which EY has made representations, and which we know HMRC are actively considering, that were not announced. Finance Bill 2017 will also see the previously announced changes to the anti-hybrids, patent box and SSE (substantial shareholdings exemption) regimes.
• There was an update to the Profits from Trading In and Developing Land legislation, to remove the exception for grandfathering of contracts entered into before 5 July 2016. This will bring all profits recognised in the accounts on or after 8 March 2017 into the charge to UK corporation tax or income tax, regardless of the date of contract.
• As announced in 2016, non-doms will be able to segregate amounts of income, gains and capital within their overseas mixed funds to provide certainty on how amounts remitted to the UK will be taxed. Following consultation on the draft legislation, this will be extended by government amendment to income, gains and capital held in mixed funds from years before 2007 to 2008, as well as those from subsequent years.
Further updates will come with the publication of the Finance Bill, and of particular importance we await updated legislation for the changes affecting non-doms.