Monday, April 26, 2021

2021 Jersey Budget Update

Jersey’s 2021 - 2024 Government Plan was approved by the States Assembly on 18 December 2020. The purpose of the Government Plan is to bring together income and expenditure decisions to improve transparency of government finances. This year’s plan reflects actions taken in response to Covid-19 and the comprehensive plans being put in place to protect the Island’s future. This update, however, aims only to set out key tax measures.

Personal Tax Proposals

Exemption thresholds

• The single person exemption threshold has increased from £15,900 to £16,000 and the married couple/civil partnership threshold has increased from £25,550 to £25,700, whilst the second earner’s allowance has moved from £6,250 to £6,300. These levels continue with the pledge to align the position of two co-habiting partners with married couples.

 Independent Taxation

• Under our current tax system married couples and civil partners are assessed as a single unit and complete one tax return.
• For opposite-sex couples, the husband is deemed the ‘primary taxpayer’ and legally responsible for the payment of tax.  For same sex-couples, and those in civil partnerships, usually the elder person is the primary taxpayer with legal responsibility for paying tax.
• Until 2021, only the primary taxpayer was able to speak to Revenue Jersey about their joint tax affairs. However, for the year of assessment 2021 and subsequent years. the Comptroller can provide income tax information, in respect of one spouse or civil partner to the other spouse or civil partner. This is a transitional step towards the goal of implementing full independent taxation for the year of assessment 2022.
• On 8 March 2021, a phased introduction to independent taxation was announced, whereby independent taxation will be mandatory for people who are single on or after 1 January 2022 and for all new arrivals to the Island after this date, whatever their marital status.
• In addition, from January 2022, around 700 married couples and civil partnerships who elected for separate assessment for the 2020 tax year will also have the option to move to independent taxation for the 2022 tax year. 
• From 2023 more Islanders will move to the new tax system, in phases.
• Further details are due to be published later this year.

Goods and Services Tax

• The fees payable by an entity wishing to register as an International Service Entity (ISE) have been increased. For example, the fee for a body corporate has increased from £500 to £750, the fee for a banking business has increased from £58,000 to £78,300 and the fee for a trust company business affiliation leader has increased from £9,350 (plus £200 per vehicle) to £13,100 (plus £300 per vehicle). There are also other increases across the board for the various types of business.

Land Transaction Tax

• First time buyers, purchasing a property through an assisted ownership scheme, will only have to pay stamp duty (or land transaction tax) on the affordable price element of the property.

Other changes

• There has been no increase to alcohol duty.
• Duty on standard tobacco products has increased by inflation plus 5% with a higher increase of inflation plus 8% for hand rolling tobacco duty.
• The duty on road fuels has increased by inflation plus 2p per litre.

On-going Work

Current year payment basis

 On 4 November 2020, the States Assembly agreed to move all prior year taxpayers onto a current year payment basis. 

• This means that if you are a prior year taxpayer the payments you have made in 2020, for your 2019 tax bill, will now be used to pay your 2020 tax liability.  From 2021 you will become a current year taxpayer and your 2019 tax bill will be frozen, though you will have to pay it in future.
• Draft payment options for paying your 2019 bill include the option to sign up to a 20-year payment plan, starting in 2022, but with nothing to pay until 2025.  

 Improving Tax Administration

• It is intended that from 2021 onwards bank account information on Jersey residents will be reported by banks to the Comptroller.

 Proposals for new business interest rules

• The rules for interest relief are being reviewed as there are a number of inconsistencies with the current regime which have resulted in tax relief not being given on some commercial transactions and in taxpayers misunderstanding their obligations.
• A detailed framework is being developed for consultation. It is anticipated the project will conclude in 2021.

 Review of Tax Residency Rules

• Work has begun on examining options for modernising the income tax law that governs the tax residence of individuals in Jersey. The review will examine international best practice and guidance.

Taxation of transactions involving “enveloped property”                                                                                                          

• Holding real estate within a company is often referred to as enveloping.
• Currently, neither Stamp Duty nor Land Transaction Tax arises where the ownership of Jersey commercial real estate is transferred by way of a share transfer.
• Proposals for the taxation of these share transactions are now fully developed and it is proposed enveloped property transfers are taxed at broadly the same rates that are applied to non-enveloped transactions.
• The draft law will be debated by the States Assembly in early 2021.

 Review of Stamp Duty

• Currently higher rates of stamp duty apply to residential property than commercial property where the value exceeds £500,000. The government is looking at whether the gap between these rates should be changed.

New Combined Employer Return

•  From January 2022 all employers and subcontractors will make one, monthly Combined Employer Return (CER) containing all information for ITIS, social security, subcontractor payments, manpower and Benefit in Kind returns.
• The new return will eliminate duplication of information requests, cutting down on administration.

Next Steps

For more information, please contact David Osborne, Head of Tax at Baker Tilly Channel Islands, on david.osborne@bakertilly.je  or DL: 44(0)7829 727 549