Thursday, March 29, 2012
Jersey Finance, the agency responsible for the promoting the island's finance industry, has responded to measures in the UK budget which seek to prevent stamp duty tax avoidance on the purchase of high-value residential property in the UK via offshore company structures.
Jersey Finance's CEO Geoff Cook called for a "measured approach" to understanding the implications of the UK budget, suggesting that the change to tax rules around the use of offshore structures to purchase UK residential property will not have a major impact on the island's financial services industry.
In the latest budget, UK Chancellor George Osborne introduced a 7% stamp duty on purchases by non-resident individuals of residential property worth more than GBP2m (USD3.2m), and 15% for residential property purchased by offshore companies. He has also proposed an annual levy on legal entities that have previously purchased high-value properties in similar transactions, and is to launch a consultation on imposing capital gains tax on their sale. The use of offshore structures has historically allowed stamp duty as low as 0.5% to be paid on property purchases, and such structures have been used in the past as a means of avoiding the UK's 40% inheritance tax.
Responding to the measures, Cook said: "The changes proposed are fiscal measures designed to increase revenues to the UK Treasury through the collection of stamp duty on UK residential property worth GBP2m or more. While this is important business for the Channel Islands' finance sector, it is very much a single service within a broad and deep portfolio of services that the islands offer."
"The demand for such properties has been much in evidence from overseas buyers many of whom will still see the purchase of London-based residential property as an attractive proposition despite the imposition of the additional stamp duty charge. It is also important to note that, unlike the changes to Low Value Consignment Relief, these proposals do not relate to a specific sub-industry, but only to a particular and specific use of offshore companies. The changes apply to all offshore companies wherever they are located in the world, so the islands are not being singled out for specific attention," he added.
Responding to suggestions that the budget announcements might impact jobs in the finance industry, Cook again called for a measured examination of the facts. He said: "As with any budget announcement, a significant period of review of the detail is needed before all implications can be understood. There will now be a lengthy period of consultation regarding the proposed changes and this will allow Jersey Finance, working alongside industry and the government, to consider the detail of the changes and respond accordingly. It is important to point out that these measures affect neither of the two largest activities in our finance industry, namely the collection and administration of deposits and funds."
Cook stressed that the finance industry in Jersey has weathered the global financial crisis well, with recent statistics showing positive growth trends over the last four years since the height of the crisis. Jersey has a well-diversified finance industry offering services across banking, funds, private wealth and capital markets, Cook emphasized, adding that all of these have shown overall growth since 2008.