B11: lodgers and paying guests (meals supplied): small scale activities
Where a guest house business does not have to register with the Minister for Economic Development, because not more than five guests are accommodated at a time, and it produces no trading accounts, the profit will be assessed as 50% of gross business receipts.
This basis will be used for guest houses fully or partially operating on terms which include the provision of food for guests whether on breakfast, half board or full board terms.
In cases where no meals are provided see the paragraph below.
B12: lodgers and paying guests (no meals supplied): small scale activities
It is acknowledged that in the case of small-scale lettings it is sometimes not possible to formulate an expenses claim because records have not been kept or there is difficulty in apportioning expenses between the let and owner-occupied parts of the property.
In such circumstances the taxable profit will be taken as 75% of the gross rents plus any sums received by way of reimbursed expenses. This concessionary calculation of the assessment is in lieu of a claim to all expenses and capital allowances.
Where the statutory basis of calculation is already in operation for computing assessments, or becomes established in the future, no change to the concessionary basis will be allowed.
B13: relief for article 107 loss and article 107A loss by reference to accounting year
Loss relief under Articles 107 and 107A is due in respect of the trading loss incurred in the year of assessment. However, by concession, relief is allowed in respect of the loss of the accounts year ending in the year of assessment except in any year that the trader requests relief on the statutory basis.
This concession does not apply to a company incorporated on or after 3rd June 2008, from the year of assessment 2008, and for all companies (other than utility companies taxed at 20%) from the year of assessment 2009 as these companies are not entitled to loss relief under articles 107 and 107A.
B14: business recovery
Where there is a full double tax arrangement in place with another jurisdiction, an enterprise of the other jurisdiction shall not be deemed to have a permanent establishment in Jersey provided that:
- the enterprise has only temporarily relocated to Jersey and solely as part of a business recovery plan; and
- the profits of the enterprise continue throughout to be charged to tax in its own jurisdiction
Where there is no full double taxation arrangement in place, requests of a similar nature will be considered upon application including the full facts, to the comptroller.
B15: bank interest arising to trading companies
Interest and dividends received by a trader are trade receipts only where it is an essential part of the trading operations to employ capital to produce such income. For example, interest on current accounts, trade interest and interest on short loans will normally rank as trade receipts.
However, in practice, the inclusion as trade receipts in company accounts of (small amounts of) bank deposit interest, but not dividends, is accepted.
B16: liquidator of non-resident company
Income arising to the liquidator of a non-resident company is not charged to tax except in the event that it is local source income which is not statutorily exempt under article 118B in the hands of a non-resident.
B17: contributions by a partnership into the personal retirement annuity contracts or retirement annuity trusts of the partners
A partnership is not construed to be the employer of the partners and therefore any such payments by the partnership will not be allowed as a deductible expense from the partnership profits assessed to income tax.
B18: grants paid to employers under the employment grants scheme (or similar schemes)
The grant is taxable in the hands of the employer and must be included as part of the income of the business.
All payments made to the apprentice employee in respect of the duties he performs for the employer will be treated as wages to that employee (whether paid from the grant or from the employer’s own funds). The individual’s income tax instalment system (ITIS) effective rate must be applied against the wages that are paid.
The full amount of the wages paid will be allowed as an income tax deduction in the accounts of the employer.
B19: rents arising to sole traders
Where a sole trader receives rent from a property owned or leased by him which does not form part of the distinct area of the property used by him for the purposes of his trade, the rent received and all expenses relating to the property must be eliminated from the computation of trading profits.
However, if there has been a long-standing practice to include the rent and expenses in the computation of trading profits that practice will be allowed to continue.
For companies, see Concession 55. Rents arising to traders.
B20: schedule A: alterations
Where income is taxable under Article 51(1)(a) that part of an outlay which is equal to the estimated cost of any maintenance or repairs saved by alterations may be allowed as a deduction except in cases where:
- the alterations are so extensive as to amount to the reconstruction of the property, or
- there is a change in the use of the property which would have made such maintenance or repairs unnecessary
B21: key man insurance
Where an employer takes out a life insurance policy on the life of an employee to protect against any potential trading loss to the business on the death of such a key employee then:
- the premiums are deductible in calculating the trader’s profits, and
- any recoveries under the policies are chargeable to tax as part of the trading profits (whether or not the deductions have been claimed)
Where the shareholders of a company or partners in a partnership takes out their own personal life insurance policy for the benefit of the remaining shareholders or partners then:
- the premiums are not an allowable business expense, and
- the taxes office will determine the taxation of receipts on a case by case basis
B22: software expenditure laid out or expended wholly and exclusively for the purposes of the trade, profession, vocation or commercial letting
Where it is appropriate to write off the cost of software as a revenue expense in one year having given due consideration to Generally Accepted Accounting Principles ('GAAP') and the financial statements follow this treatment then the Comptroller will allow the expenditure as revenue expenditure and agree a tax deduction in that year.
Alternatively where the expenditure on software is capitalised in the financial statements and GAAP requires that expenditure to be capitalised in the accounts, the Comptroller will not allow a one off revenue deduction but will treat the expenditure as capital expenditure incurred on the provision of plant.
B23: Group life insurance schemes
Article 70D allows an employer to claim tax relief for Schedule D Case I or II purposes in respect of contributions payable into a group life insurance scheme, but with two limitations:
- Death benefits cannot exceed five times the emoluments of the deceased employee in the year prior to death.
- Anyone with more than 20% interest in the employer company cannot be a beneficiary of the scheme.
By concession, in cases where one or more employee does hold a more than 20% interest in the employer company and are beneficiaries of the scheme, where the contributions payable to the scheme provider are calculated (by the scheme provider) on an individual employee basis, an employer company can continue to claim tax relief under Article 70D for contributions payable in respect of employees who have a 20% or less interest in the employer.
For the avoidance doubt, where contributions are not calculated on an individual employee basis, and one or more employee in the scheme has a more than 20% interest in the employer, no relief will be claimable under Article 70D for any of the contributions payable.
Article 82A applies for the purposes of determining whether or not an employee has a greater than 20% interest in the employer company.