When taxpayers extract profits from a company, that income will be subject to income tax. However, if a company reinvests its profits to grow its business, neither the company nor the shareholders will be taxed.
The new rules partly work by broadening the definition of a distribution. The calculations use the taxable profits reported by the company, and hence anything which is not taxable in the company, such as capital gains, is not taken into account.
Another important anti-avoidance measure is designed to ensure individuals employed through a personal services company pay tax on their income in the same way as an employee would.
Heather Bestwick, Deputy CEO of Jersey Finance said Osborne’s Autumn statement contained content that was “very much aligned with Jersey’s position and the position of our finance industry”.
“As we continue to emphasise, Jersey is interested in high quality, high value and entirely legal business. We are therefore pleased to hear about plans to tackle promoters of aggressive schemes that seek to exploit UK tax law and support the introduction of a General Anti Abuse Rule (GAAR) as a measure that will hopefully add clarity to the UK’s highly complex tax code."
Bestwick added that in terms of the stated aim to create a UK centre of excellence for tackling offshore evasion “this is an ideal opportunity for Jersey to work closely with the UK to demonstrate our stringent defences and zero tolerance approach to tax evasion, something that is a criminal offence in Jersey”.
