Equity firm's March exit 'is not a sign of exodus’
A ‘MAJOR EXODUS’ of businesses from Guernsey as the result of changes in cross-border taxation is not on the cards, according to leaders of the finance industry.
The reassuring messages come after HICL Infrastructure Company Ltd confirmed its intention to change the domicile and tax residency of its investment business from Guernsey to the UK within days of Brexit taking place next March. Rules requiring tax resident firms to prove they have sufficient substance locally will also have taken effect.
HICL is a long-term equity investor in infrastructure, working with public sector clients. Its portfolio comprises more than 100 investments and is valued in excess of £2bn. Projects span a range of sectors, including education, health and transport, in the UK and overseas.
‘The board has announced today that it is proposing that the company should move its investment business from Guernsey to the UK. We believe this is in the best interests of shareholders as a whole in light of the evolving cross-border taxation landscape.
‘This proposal will require shareholder approval, which will be sought at an extraordinary general meeting in Q1 2019,’ said HICL board chairman Ian Russell in the company’s latest interim results.
The company said that the board was recommending the move of the investment business to a new UK incorporated plc following an informal consultation with a number of institutional shareholders.
If approved by shareholders, the move is expected to complete on 31 March 2019 or shortly thereafter. Some 90% of HICL’s shareholders are UK-based, which include retail and institutional investors.
Heightened political uncertainty in the UK was also a key risk, according to the company. Commentary around the potential nationalisation of infrastructure assets ignored the ‘considerable benefits’ that private capital brought to the public sector, it said.
‘More practically, nationalisation would be highly complex and come at a considerable cost to taxpayers,’ said HICL.
Paul Smith, chairman of the Guernsey Investment Fund Association, said: ‘Whilst we are disappointed to see a company such as HICL taking the decision to relocate from Guernsey to the UK, this is something that can occur as companies and their target markets change.
‘We have also seen a number of funds and companies relocating to Guernsey from other jurisdictions so this is part of the overall current economic environment.
‘Moves such as this are particular to the companies involved and without having access to the details behind this decision it is difficult to comment. We do not anticipate a major exodus of business from Guernsey following this proposed move by HICL.’
Dominic Wheatley, chief executive of industry promotional agency Guernsey Finance, said: ‘We cannot comment on the specifics of the HICL decision, but firms make decisions on domicile all the time – sometimes this works in Guernsey’s favour, sometimes it doesn’t.
‘We remain confident that Guernsey remains a specialist and stable domicile and continues to be attractive to a variety of funds.’
Mariana Enevoldsen, a director of Estera International Fund Managers (Guernsey) Ltd, said: ‘Some redomiciliations have taken place, particularly in the case of property funds becoming UK real estate investment trusts. However, after the redomiciliation the local service providers have remained in place.
‘Indeed, as a jurisdiction, Guernsey continues to add enormous value regardless of the domicile, due to the ease of doing business here as well as the depth of experience and the quality of the service providers.’