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Prior Year Basis (PYB) Tax Reform

Tax Reform proposition approved 

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

This means that if you were a prior year taxpayer the payments you made in 2020, for your 2019 tax bill, were used to pay your 2020 tax liability. From 2021 you have become a current year taxpayer and your 2019 tax bill will be frozen, though you will have to pay it in future. 

All prior year taxpayers received a letter from the Comptroller explaining what to expect.

Copy of tax reform letter

Prior year basis (PYB) 2019 payment

Find out about your payment options for the PYB 2019 tax.

Pay your PYB 2019 tax

PYB 2019 tax payment 

Tax reform and 4 steps to change

We had 4 steps to complete.

Step 1

Revenue Jersey completed all 2019 return assessments, which confirmed the amount of tax that was frozen.

Step 2

Revenue Jersey made the 'switch over' early in 2021, and you become a current year taxpayer. Changes were made to our records to move all the payments you have made to cover your 2019 liability, towards your 2020 tax bill.

Step 3

You filed your tax return. In it was all the information we needed to assess the tax due on your 2020 income.

Step 4

In February 2021 we started assessing returns for prior year taxpayers, checking the tax you paid in 2020 against the tax owed for 2020. We sent you your assessment and if you paid by ITIS a revised current year rate was also included.

 


Checking your 2019 tax liability

Your 2019 tax liability is stated on your 2019 notice of tax assessment. 

General Partnerships

The proposal to move all personal taxpayers from a prior-year payment basis to a current year payment basis will apply equally to General Partnerships.

The 2019 liabilities of general partnerships were frozen and all 2019 year of assessment payments made were transferred and set off the 2020 year of assessment liability.

Two phases of reform

In July 2020 the Minister for Treasury and Resources wrote to all personal taxpayers to outline her plans to move all Prior Year Basis (PYB) taxpayers onto Current Year Basis (CYB).  

Around two-thirds of taxpayers currently pay their tax for the previous year in the current year. For example, in 2020, these taxpayers were paying for their 2019 tax liability through their 2020 earnings. For tax purposes, this is known as Prior Year Basis.  

The proposals were delivered in 2 phases:  

Phase 1 

An Amendment to allow Revenue Jersey to freeze the 2019 tax liability and use 2019 tax payments to pay the 2020 tax liability.  

Phase 2 

Regulations that would govern how the frozen 2019 tax liability would need to be paid. 

In August 2020 we ran a survey for Islanders to submit their views on the PYB Tax Reform Proposal. You can read the full report on the survey findings here. We also ran focus groups during October 2020 and emerging findings helped shape Phase 2 of the Proposals, the Regulations.

PYB Tax Reform proposal survey and findings

Developing the payment options (Phase 2)

The draft payment Regulations and supporting report were lodged with the States Assembly on 10 February 2021 and were debated in late March 2021.

The Regulations and report set out the proposed options for paying the frozen 2019 PYB tax bill and have been developed in response to the results of the PYB survey, the findings of the  focus groups, which were run last October, as well as feedback from the Corporate Services Scrutiny Panel and States Members.

Focus group report

When a 2020 bill is significantly higher than the 2019 bill 

We accelerated work to bring in this change, because we are aware many islanders have suffered much reduced income in 2020 and face a 2019 bill they cannot pay from their smaller income.

However, we recognise for some the situation may be reversed. If may find yourself with a significantly higher 2020 tax bill than your 2019 one, for example, through returning to work after maternity leave. Revenue Jersey will ensure such situations are dealt with sympathetically and fairly and will minimise the impact for you.

Prior Year Basis taxation explained

Before we introduced the Income Tax Instalment System (ITIS), islanders usually paid their whole tax bill in one payment each year. There was no option to pay instalments from your salary. 

The Taxes Office would not know what taxpayers owed in tax until they submitted their tax return in the following year.

A new taxpayer would have a tax liability in their first year but would pay no tax until the year after.

For example:

  • a new taxpayer started work in January 2001, earning £20,000 that year
  • the tax would be in the region of £2,300 on their 2001 income, but would not have a bill to pay until 2002
  • tax returns for 2001 were sent out at the start of the following year (2002) 
  • the completed 2001 tax return would be received during 2002
  • it would be assessed, but the bill would not go out until September 2002, when all tax assessments went out the same time in a general issue
  • they would have until December 2002 to pay their 2001 tax

In this way, before ITIS was introduced, all islanders paid their tax on a Prior Year Basis (PYB). 

Income Tax Instalment Scheme (ITIS) introduced

In 2006, the way islanders paid their tax changed when we introduced the income tax instalment scheme. This collected monthly instalments from your salary if you were employed or if you didn't have employment income, you paid an instalment yourself early in the year and a balancing payment at the end of the year.

For most taxpayers this changed the way tax was paid but it didn't change the year they were paying. Payments still went to the previous year's bill. So in 2006 the instalments went towards the 2005 tax (prior year basis).

The tax from the previous year is always payable, but due in the following year. This can cause payment issues for anyone whose income drops in the following year, for example through retiring or redundancy.

New taxpayers from 2006

There is a group of taxpayers where payments don't just go to the previous year's unpaid tax.

Instalments from employed taxpayers who registered for tax from 2006 go towards the same year's tax (current year basis). So in 2006 any instalments went towards the estimated 2006 tax and then continued on this basis.

The Income Tax Instalment System (ITIS) rate is calculated from the registration information the taxpayer provides and then estimated each year after that based on the previous year's tax assessment. The rate can be updated by the taxpayer if their income changes to make sure they don't underpay.

This tax is then finalised the following year when the return is submitted and any unpaid balance would need to be paid or a repayment would be due if the tax was overpaid.

This left people who newly registered for tax from 2006 or returned to Jersey after an absence to pay on a current year basis. Anyone who was an existing taxpayer before 2006 continued to pay on a previous year unless they opted to pay in advance and move to a current year.

This was the status quo until this tax reform.

How the Income Tax Instalment System (ITIS) works

How the Income Tax Instalment System (ITIS) rate is calculated

Understanding your assessment

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