Practice notes on technical tax matters

​​​​Overview

​​​​​Revenue Jersey occasionally release practice notes on technical tax matters. These are primarily aimed at tax and legal professionals.

​Distributions from overseas co​​mpanies

​Revenue Jersey is in the process of assessing whether further clarity to the treatment of distributions from overseas companies and their taxation under Case V of Schedule D is required.

​This review forms part of the work on the Financial Services Competitiveness programme and, while it is underway, Revenue Jersey will not seek to challenge transactions entered into on the basis of the established interpretation of these provisions.

In particular, Revenue Jersey's current position is that the following transactions arising from overseas companies are not treated as being taxable under Case V:

• Share buy-backs​
  
• Share redemptions
• Writing off and repayment of shareholder loans
• Liquidation distributions
• Capital reductions which represent a genuine return of capital
• Any other substantially similar transaction

Revenue Jersey reserves the right to challenge any transaction under the provisions contained within Article 134A if the Comptroller is of the opinion that the main purpose, or one of the main purposes, of a transaction, or a combination or series of transactions, is the avoidance, or reduction, of the liability of any person to income tax.

Any clarity required from the review that brings about a change in treatment will be advised to taxpayers in good time and will not be applied with retrospective effect.

​Assignment of in​​co​​me

​Some tax planning schemes allow an individual to assign their right to income to a connected party while retaining the beneficial interest in the asset. The individual then claims they should not be taxed on this income. Revenue Jersey do not accept that these schemes are effective for Jersey income tax purposes.​

​Practice Note - Assignment of income

​​Share schemes​​

A taxable emolument can arise from schemes which award shares or options to buy shares at less than their market value. However, the terms of these schemes are often varied and complex. Unless otherwise determined, Jersey follows the principles set out in UK case law for the taxation of officer and employee share scheme awards.

Practice Note - Taxation of award schemes

​Self-storage businesses​

Revenue Jersey considers self-storage businesses should be taxed on a Schedule A basis. If any self-storage business believes it is a trading concern taxable on a Schedule D Case I basis, they should write to Revenue Jersey setting out why they consider Schedule A is not appropriate. Otherwise, all self-storage businesses will be assessed to Schedule A from 1 January 2024.

Practice Note - Self-storage businesses

​Carried interest

Jersey's long-standing position on carried interest is that it is a sh​are of capital profits and not taxable. This accords with the UK's approach and relevant case law.

Statement of practice - carried interest 

​​​Investments portfolio accounting​

The requirement for accounting records to identify all transactions further to Taxation (Accounting Records) (Jersey) Regulations 2013 is relaxed where, in limited circumstances, certain investments are accounted for on a portfolio basis. This practice note does not apply to income generated by such investments.​

Practice Note - Investments portfolio accounting

​Shareholder loan repayments and entitlement to credits

The legislation at Article 81O(6) Income Tax (Jersey) Law 1961 allows relief in the form of tax credit when a shareholder loan is subsequently repaid, in whole or part, to the company.

The formula in legislation is designed to allow a level of relief, being that tax liability which arose in an earlier year of assessment on the portion of the loan now being repaid. This relief is however restricted to the tax liability arising in the repayment year of assessment, this will not generate a tax repayment or tax credit to set against other years of assessment.

The personal tax return allows a claim for such a tax credit to be made in the return. Where a claim is made in a tax return, the claim should be accurately made in line with the formula, and restricted in those circumstances where it would exceed the tax liability.

If there is any doubt as to the calculation of the tax credit, Revenue Jersey would expect that the tax return is submitted without the tax credit claim and a separate subsequent claim is made, on receipt by the individual of their tax assessment.

Where excessive claims are discovered, Revenue Jersey will reduce the claims, and reinstate any liabilities, including any consequential outcomes, for example, surcharges.​​