Islands ‘should not miss opportunity from UK Budget’
THE Channel Islands should not miss the opportunity to encourage high net worth individuals to relocate on the back of a £40bn tax grab unveiled in the UK Budget this week.
But one partner of a big CI firm of accountants fears that they will.
John Shenton, tax partner at Grant Thornton in Jersey, said that the islands needed to be proactive to respond to the scenario that ‘wealth creators seem to be no longer welcome in the UK’.
‘However, we fear that the islands will fail to grasp this opportunity and like most things recently, fail to make a decisive decision and instead watch the opportunities disappear.’
Mr Shenton said that the islands ‘need to demonstrate that they are open to new business and families’, but believed that it could be possible to attach conditions on new arrivals – potentially requiring private health insurance, pension arrangement and minimum tax liabilities to be linked to any licence granted to a new entrant.
He said that increases in inheritance taxes and changes to how trusts are considered in that situation, capital gains tax, and stamp duty land tax on second homes, combined with the abolition of the non-domiciled regime and other tax changes, were unlikely to drive domestic economic growth in the UK.
‘Rather these measures could persuade businesses, entrepreneurs and wealthy individuals to leave the UK.’
David Waldron, tax partner at PwC in Guernsey, said that the well-trailed abolition of the ‘non-dom’ tax regime in favour of what the government described as a ‘modern, simpler and fairer residency-based system’ would be likely to have significant implications for offshore trusts with UK-resident settlors, either non-domiciled or deemed domiciled. He also noted that offshore interest was a further consultation announced over the UK’s rules on transfer pricing, permanent establishments and Diverted Profits Tax alongside considering opportunities to simplify or rationalise the UK’s rules for taxing cross-border activities in the light of Pillar 2 tax changes.
It has also been highlighted that changes to the tax regime for carried interest may damage the UK’s attraction for the private equity and venture capital sector, one of Guernsey’s strengths.
The first Labour Budget for 14 years included tax rises worth £40bn., including a rise in National Insurance contributions for employers from 13.8 to 15%. Chancellor Rachel Reeves said it was ‘not the sort of Budget we would want to repeat’.
Tory leader Rishi Sunak said the Budget contained ‘broken promise after broken promise’. The Institute for Fiscal Studies said that overall there was ‘little in the way of serious tax reform’.
