Category: General

This month we are delighted to introduce Steven de Jersey, a Director of the Dixcart Fiduciary Business in Guernsey.

Steven de Jersey

Director

FCA

steven.dejersey@dixcart.com

Steven is a highly accomplished Director at Dixcart Guernsey, bringing over 30 years of extensive experience in the Guernsey Finance Industry.  As a distinguished Member of the Institute of Chartered Accountants in England and Wales, Steven joined Dixcart in 2018 and assumed a pivotal role in leading the Corporate and investment vehicle offering as well as working alongside fellow directors on the private client structures. Accordingly, he actively promotes the corporate, investment vehicle and listing services throughout the Dixcart Group alongside the traditional private client services.

With a specialisation in the establishment and administration of diverse domestic and offshore corporate vehicles, trusts, investment trusts, companies, limited partnerships, and investment vehicles, Steven caters to the needs of corporate, institutional, and private clients.  His expertise encompasses a wide range of areas, including holding structures, mergers and acquisitions, migrations, restructuring, refinancing, joint ventures, debt and equity, private placements, funds and listings.  As a result, Steve often works with local and international advisors in providing structuring solutions and efficiently administering structures.

In addition, Steve frequently travels to the UK and various other jurisdictions around the world, notably South Africa, nurturing vital connections with advisors and clients. He consistently demonstrates his dedication to fostering meaningful professional relationships with a focus on working with clients and their advisors in establishing and administering their structures and building up a trusted and strong working relationship.

Outside of work, Steven enjoys an active life.  He immerses himself in the local rugby and football scene, still actively participating for veteran’s teams as well as being a passionate motorsport enthusiast regularly competing in local events.

In summary, Steven de Jersey is an accomplished professional who combines his extensive expertise in the finance industry with a commitment to building lasting relationships with clients and colleagues.

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey registered company number: 6512.

Switzerland is a very attractive location to live and work in for many non-Swiss nationals.

Switzerland is a beautiful country with amazing scenery as well as a number of world-famous cities such as Bern, Geneva, Lausanne, and Zurich. It also offers an attractive tax regime for individuals as well as for companies, in the right circumstances.

Here is a summary of the benefits Switzerland has to offer businesses and individuals and why it is a popular jurisdiction for asset protection, residence and company establishment.

What does Switzerland Offer Businesses, Individuals and Families?

• Located in the centre of Europe
• Economic and political stability
• A well-respected jurisdiction with an excellent reputation
• Most ‘innovative’ country in the world for nine consecutive years
• Lengthy history of expertise in finance and business
• Premier destination for international investment and asset protection
• High regard for personal privacy and confidentiality
• Very good living and working conditions

Dixcart Trustees (Switzerland) SA has been providing trustee services for over fifteen years. We are a member of the Swiss Association of Trust Companies (SATC), and are registered with the ”Organisme de Surveillance des Instituts Financiers” (OSIF).

Who does Switzerland Appeal to, Internationally?

• International Headquarter Companies for Groups
• Substantial Trading Companies
• Large domestic and overseas Banks with expertise in open international capital markets
• Trusts and Private Trust Companies
• Family Offices
• Individuals seeking to redomicile within central Europe

Double Taxation Agreements (DTAs)

• Switzerland has over 100 DTAs
• Swiss companies benefit from the EU ParentSubsidiary Directive, a tax exemption for cross-border dividends paid between related companies in the EU (Switzerland is not in the EU, but is in the ‘Schengen area’)

Use of a Swiss Company as Trustee

• A Swiss company can act as Trustee or take another role in your family Trust to manage and administer your Trust in Switzerland
• Trusts are not subject to taxation in Switzerland
• The Settlor and Beneficiaries are not subject to taxation, as long as they are not resident in Switzerland
• Dixcart Trustees (Switzerland) SA has been providing trustee services for over fifteen years. We are a member of the Swiss Association of Trust Companies (SATC), and are registered with the ”Organisme de Surveillance des Instituts Financiers” (OSIF).

Moving to Switzerland

• Working: a work permit enables any individual to become Swiss resident (must have a job or form a company and be employed by it)
• Not working: straightforward for EU citizens. Non-EU citizens must be over the age of 55

Lump Sum System of Taxation

• Applicable on moving to Switzerland for the first time, or returning after a minimum ten year absence (no gainful employment in Switzerland, but can be employed in another country and can administer private assets in Switzerland)
• This particular taxation system is based on the taxpayer’s living expenses in Switzerland, NOT on worldwide income and assets
• The amount of living expenses on which income tax is based, varies from canton to canton, and is usually negotiated with the relevant tax authorities (in Geneva, a minimum taxable income of CHF400,000 is required)

The Dixcart Office in Switzerland

If you require any further information on moving to Switzerland or the establishment of a Swiss company for asset protection, please contact Christine Bretiler in our Swiss office: advice.switzerland@dixcart.com

Can foreigners buy property in the UK?

Yes. There is nothing stopping a non-UK resident individual or corporate body buying property in the UK (although an individual will need to be aged 18 years or above to own legal title to property and an overseas corporate entity must before acquiring a qualifying property firstly be registered at Companies House in compliance with the Economic Crime (Transparency and Enforcement) Act 2022).

Other than the above, different laws apply in Scotland and Northern Ireland as opposed to property in England and Wales.  We will focus below on property located in England and Wales. If you intend to purchase property in Scotland or Northern Ireland, please seek independent advice from a specialist in those areas.

The below guidance is focused on property located in England and Wales.

How do you begin your property search?

There are a number of online property search engines. Traditionally agencies either specialise in commercial or residential property but not both.  Start with a search engine to compare properties in your chosen city or other location and get in touch with the local agent advertising the property to arrange a viewing. Negotiating price below the price advertised is common.

Why is it important to view a property?

Once you find a property it is important to see it, carry out the usual pre-contract searches against it (a property solicitor or registered conveyancer will be able to assist you) or ask a surveyor to view it.  

The principle of caveat emptor (“let the buyer beware”) applies at common law. A buyer alone is responsible for checking a property. To purchase without carrying out a viewing or survey will in most cases be at the entire risk of the buyer. Sellers will normally not provide warranties or indemnities as to the suitability of the property. 

How do you finance the purchase?

The estate agent and any professionals involved in the sale will be interested to know how you intend on financing the purchase. This could be with cash, but the majority of property purchased in England and Wales is through a mortgage/property loan. There are no restrictions on foreigners securing a UK mortgage to help finance a purchase although you might encounter stricter requirements, the obligation to pay a larger deposit and higher interest rates.

What type of legal “estate” to the property are you intending on buying?

Generally, property is either sold with freehold title (you possess it absolutely) or leasehold title (borne out of freehold property which you possess for a number of years) – both are estates in land. A number of other legal interests and beneficial interests also exist but these are not covered here.

His Majesty’s Land Registry holds a register of all legal titles. If your offer price is accepted your legal advisor will review the relevant register of legal title for that property to see if the property you are buying is being sold subject to any incumbrances. Pre-contract enquiries will also normally be raised with the seller to ensure there are no over-riding third party interests in the property that may not have been obvious from your site visit.

If more than one purchaser wants to own the property, how will that property be held?

The legal title to property can be held by up to four legal owners. 

There may be tax advantages or disadvantages to how you decide to hold property as legal owner and whether that is by individuals or corporate entities or a combination of both. It is important to take independent tax advice at an early stage. 

Where the property is intended to be held by co-owners, consider whether the legal title should be held by the co-owners as “joint tenants” (the beneficial ownership of each pass on death to the other co-owners) or as “tenants in common” (the beneficial share owned, passes on death to their estate or dealt with under their will).

What happens next?

You have found a property and your offer price has been accepted and you have decided who will hold the legal title to the property. What happens next?

You will need to instruct a solicitor or conveyancer to carry out the relevant due diligence, raise enquiries, carry out the usual pre-contract searches and advise you on potential tax liability. You will need to pass the usual “know your client” due diligence before the legal work gets underway so be prepared to locate the relevant documents needed for the usual money laundering and other checks.

When purchasing a freehold or leasehold subject to a premium, a contract is usually drafted and negotiated between the parties. Once it is agreed, the contract is “exchanged” at which point a deposit is paid to the seller’s solicitor (usually around 5 to 10% of the purchase price). Once a contract is exchanged both parties are bound to perform the contract (sell and buy) pursuant to the terms of the contract.  “Completion” of the transaction happens on a date set out in the contract and is typically a month later but can be sooner or much later, depending on whether the contract is subject to conditions being satisfied.

Upon completion of the transfer of freehold or long leasehold property, the balance of the purchase price will become payable. For new short leases of both commercial and residential properties, once the new lease is dated, the matter has completed and the landlord will send the new tenant an invoice for rent, service charges and insurance as per the terms of the lease.

The buyers’/tenants’ solicitor will need to make an application to His Majesty’s Land Registry to register the transfer/new lease. The legal title will not pass until the registration is complete. 

What taxes need to be considered when taking a leasehold title or a freehold title?

The tax treatment from owning a freehold or leasehold in the UK will largely be dependent on why the individual or corporate entity holds the property.  A purchaser may buy or lease a property to reside in, occupy premises to conduct their own trade from, own to develop in order to realise a rental income or buy as an investment to develop and sell on for a profit.  Different taxes apply at each stage so it is important to speak with a tax specialist early on, depending on what plans you have for the property. 

One tax that is payable within 14 days of completion of a lease or property transfer in England  (unless one of the limited reliefs or an exemption applies) is stamp duty land tax (“SDLT”).

For residential properties see the following rates below. However, a surcharge of an additional 3% is payable on top if the purchaser already owns property elsewhere:

Property or lease premium or transfer value	SDLT rate
Up to £250,000	Zero
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £575,000 (the portion from £925,001 to £1.5 million)	10%
The remaining amount (the portion above £1.5 million)	12%

When buying a new leasehold property, any premium will be subject to tax under the above. However, if the total rent over the life of the lease (known as the ‘net present value’) is more than the SDLT threshold (currently £250,000), you’ll pay SDLT at 1% on the portion over £250,000. This does not apply to existing (‘assigned’) leases.

If you’re not present in the UK for at least 183 days (6 months) during the 12 months before your purchase, you are ‘not a UK resident’ for the purposes of SDLT. You will usually pay a 2% surcharge if you’re buying a residential property in England or Northern Ireland. For more information on this, please read our article: Overseas buyers thinking of purchasing a residential property in England or Northern Ireland in 2021?

On commercial property or mixed-use property, you will pay SDLT on increasing portions of the property price when you pay £150,000 or more. For a freehold transfer of commercial land, you will pay SDLT at the following rates:

Property or lease premium or transfer value	SDLT rate
Up to £150,000	Zero
The next £100,000 (the portion from £150,001 to £250,000)	2%
The remaining amount (the portion above £250,000)	5%

When you buy a new non-residential or mixed use leasehold property you pay SDLT on both the purchase price of the lease and purchase price of the lease and the value of the annual rent you pay (the ‘net present value’). These are calculated separately then added together. The above referred to surcharges also apply.

Your tax professional or lawyer will be able to calculate your SDLT liability according to the rates that apply at the time of your purchase or lease.

Other useful links:

• https://www.gov.uk/government/publications/how-to-buy-a-home/how-to-buy
• https://www.gov.uk/government/publications/how-to-lease/how-to-lease
• https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
• https://www.dixcartuk.com/five-years-have-passed-since-the-uk-government-set-out-its-intention-to-create-a-public-register-of-the-beneficial-ownership-of-overseas-entities-uk-assets-progress/
• https://www.dixcartuk.com/register-of-overseas-entities-a-comprehensive-guide-to-the-new-registration-requirements-for-overseas-owners-of-uk-property/
• https://www.dixcartuk.com/pre-arrival-uk-tax-planning-for-non-uk-domiciled-individuals/

For more information or guidance on how to buy property, structure your business to save tax, tax considerations in the UK, incorporating outside the UK, business immigration or any other aspect of relocating or investing in the UK please contact us at advice.uk@dixcart.com.

This year, Dixcart is delighted to be celebrating its 50^th anniversary.

• Chapter 1
• Chapter 2

The Group was founded in 1972 and over the last 50 years has grown into 8 offices in 7 different jurisdictions: Cyprus, Guernsey, the Isle of Man, Malta, Portugal, Switzerland, and the UK. View all of our offices here.

We have been providing professional support services for 50 years and are now celebrating our 50th anniversary.

There has been a large number of individuals significantly involved in the growth of the company over the years – too many to mention in this article. So many have helped to grow the Group offering we have today, from the Managing Directors involved at the inception of each office all the way through to today, to the long-standing staff we have, and professional team that makes Dixcart so special. It is the skill and expertise of our staff that makes us unique, and we are very proud of our people. We are delighted that over the years, a large number of staff have worked for the Group; some for more than twenty years, and a few for over thirty years now. 

We take a look back at Dixcart’s history and how it all began:

Chapter 1

Woolford Business

The Woolford business started in 1972 when Percy Woolford decided to move to Sark, in the Bailiwick of Guernsey.

At the same time, he established the first Dixcart Office in Guernsey, and began providing international financial services and advisory support for international clients.  

Rob Joins the Family Business and expands Dixcart: Madeira and the UK

With Percy Woolford running Dixcart Trust Corporation Limited in Guernsey, Rob Woolford, Percy’s son, was working at Midgley Snelling & Co, a firm of Chartered Accountants in the UK which handled a lot of mutual business. Early in 1989 Rob left Midgley Snelling & Co. and started a new accounting practice in the UK with Peter Wilman, called Woolford & Co Chartered Accountants, along with the establishment of a subsidiary of Dixcart to provide the support in the UK for the international clients of Dixcart. On Monday 3^rd April 1989 the Dixcart office in the UK was established.

Meanwhile Percy Woolford had earlier in 1988 opened a new Dixcart office in Madeira, Portugal, to provide corporate services within the Madeira Free trade zone.

The Isle of Man

From 1968 onwards, Rob had worked actively with the Midgley Snelling & Co office in the Isle of Man, handling their international clients. These regular annual visits to the Isle of Man grew the desire to establish a Dixcart IOM office and in April 1989 this was put in place in conjunction with a local firm of Chartered Accountants called Edwards & Hartley, who managed the Dixcart office for many years. It was in 1996 that Dixcart established a physical presence in the Isle of Man, and the Dixcart office was established as a separate entity with its own premise.

Dixcart UK Accountants and Lawyers

Over the next five years, since its inception, Woolford & Co in the UK continued to grow and in 1994 Dixcart International was formed – working closely with the Dixcart offices and clients in the Channel Islands, Isle of Man and Madeira. Woolford & Co Chartered Accountants concentrated on UK professional services for UK enterprises and the development of an accounting practice.

In 1996 a joint venture called Sandown Insurance Services Limited was started. It was a general insurance brokerage business which ran for a further successful eight years before new rules made the compliance too onerous for a small brokerage business and it was sold.

However, things did not stand still for long!

In 1999, friends of Rob; Paul Morgan and Jeremy Russell left Mackrell Turner Garrett Solicitors and accepted an invitation to join the organisation in the UK, and thus Morgan Russell was born, growing the UK office from a team of accountants to a joint team of accountants and lawyers. In 2014, Morgan Russell adopted the Dixcart name and became Dixcart Legal.

Dixcart UK now has three entities: Dixcart Audit; Dixcart Chartered Accountants and Tax Advisers – Dixcart International Limited; and Dixcart Legal Limited.

We have therefore now been providing legal commercial services from the UK to international and UK clients for 20 years.

Next stop: Switzerland

It soon became clear that the expansion of the Group, from a service and marketing perspective, would be enhanced with a presence in Geneva. This resulted in the establishment of Dixcart Corporate Services in Geneva in 1997, initially managed by a local service provider but quickly growing into its own offices and providing local Swiss services. This enhanced the Dixcart Group’s network of contacts and further developed the client base needing Group services.

Chapter 2

Dixcart’s Service Offering Continues to Grow: IT and Dixcart Business Centres

In 2004, the Dixcart UK office saw another acquisition when Adder, an IT company, was taken over and became Surrey Business IT in 2005, offering IT support to the Group as well as serviced and virtual offices.

Over the years it was gradually agreed, that as the majority of marketing effort was directed towards the Dixcart brand, Woolford & Co would take advantage of this marketing umbrella and also take the Dixcart name. Since January 2017, the UK accounting side has operated as: Dixcart Audit, Dixcart Chartered Accountants and Tax Advisers, Dixcart International and Dixcart Legal Limited.

Over the years Dixcart has always owned the buildings where our offices are based and has provided serviced offices for many years. Dixcart now has five Business Centres, in five different countries. The Business Centres are all in prime locations and offer high quality serviced office space, meeting room facilities, and on-site reception services. Our Dixcart professionals are located in the same building – which allows us to provide additional business support services, if required.

Heading to the Med: Dixcart Malta Office

Malta is an excellent jurisdiction for individuals either relocating to Malta, managing asset protection and succession planning, or for establishing corporate structures. It was a great fit for Dixcart when we decided to open an office in 2007, initially renting space in various offices but culminating in 2010 in the purchase and renovation of a prime office in Ta’Xbiex, enabling the continued expansion of the office and the provision of serviced offices.

Cyprus

Having been established in 2012, in response to client demand, the Dixcart office in Cyprus has grown, as the island has recovered from the turbulent years post credit crunch. Eventually in December 2019,the Dixcart office in Cyprus moved to its new premises in Limassol. With this investment, Dixcart is able to continue its growth and provide clients with a comprehensive range of business support services, including serviced offices in Cyprus.

Dixcart Portugal – Two Locations

In 2017, Dixcart established a second Portuguese office in the centre of Lisbon, Portugal, to complement and enhance the Dixcart offering in Madeira. Even though the Lisbon office is smaller, it has opened up several new business opportunities and has become a central hub for meeting clients and contacts.

2022: Dixcart Turns 50  

This year Dixcart is celebrating its 50^th Anniversary.

We are an independent group and are proud of our experienced team of well-qualified, professional staff who offer international professional support services across the world.

Dixcart Culture: We are independent

The objective of Dixcart as a Group has been to provide international advice and management to wealth generators, along with the implementation of structures to support individual and family needs for the ongoing organisation of their international financial affairs.

The Dixcart Culture is unique and shapes our identity and corporate personality. It is what makes us different and generally what attracts our clients to us and ensures that they return with new projects requiring additional solutions from us.

• We are independent – privately owned and not tied to any other Group. This means that we can provide clients with impartial advice and the best solutions to meet their specific needs.
• We employ independent thinkers.
• We are proud to be a privately owned business, and this is reflected in our values, both towards our clients and towards each other.
• Even though we have a number of offices in different countries – we meet regularly and there are many deep friendships that run, not only within, but also across the Dixcart offices.

We look forward to the next 50 years.

advice@dixcart.com

Over the past few years, there has been an increase in customers buying goods and services using digital platforms and this has accelerated during the pandemic. This article will cover exactly what cryptoassets are and the tax treatment, in the UK, for both individuals and businesses.

What are Cryptoassets?

Cryptoassets, also known as ‘tokens’ or ‘cryptocurrencies’, are cryptographically secured digital representations of value or contractual rights that can be:-

• Transferred
• Stored
• Traded electronically

There are numerous types of cryptoassets and they each work in different ways. The main 4 types of cryptoasset that you may encounter are as follows:

• Exchange tokens – Intended to be used as a means of payment and this includes the most well-known token, the bitcoin.
• Utility tokens – This provides the holder with access to particular goods or services on a platform. This is usually where a business will issue tokens and commit to accepting the tokens as payment for particular goods or services.
• Security tokens – This provides the holder with particular rights or interests in a business, such as ownership or entitlement to a share in future profits.
• Stable coins – These tokens minimise volatility as they are aligned to something that is considered to have a stable value, such as precious metals.

How the UK Tax Authorities Treat Cryptoassets

The tax treatment of all types of tokens is dependent on the nature and use of the tokens. It is not based on the definition of the token. HMRC does not consider a cryptoasset to be currency or money.

Tax Treatment of Cryptoassets for Individuals

Income Tax Treatment

Cryptoasset activity must be recognised as a trading activity for income tax rules to apply. To determine if a trading activity has taken place, HMRC will apply a series of tests known as ‘The Badges of Trade’. Any profits from this activity will be subject to income tax at an individual’s marginal rates (20%, 40% and 45%). There will also be Class 2 and 4 National Insurance due at the current rates applicable.

Capital Gains Tax Treatment

Where the transactions in cryptoassets are regarded as a personal investment, then they should be treated as a chargeable asset for Capital Gains Tax (‘CGT’) purposes. Any gain realised on a cryptoasset bought and subsequently sold, is subject to CGT at the current rate of 10% for a basic rate taxpayer and 20% for a higher rate taxpayer. Losses realised in the same way, can only be relieved against capital gains chargeable to CGT.

Non-Domiciled Individuals

The nature of cryptoassets is that they are decentralised, digital in nature and do not have a physical location. Determining the location or ‘situs’ of an asset is therefore important for UK resident, non-domiciled individuals, as it can change the tax consequences.

HMRC guidance has stated that the location of a cryptoasset is wherever the beneficial owner is resident. If the cryptoasset owner is resident in the UK, then the cryptoasset may also be located in the UK.

There is a need to watch out for the circumstances in which a UK resident, non-UK domiciled individual purchases cryptoassets using their untaxed foreign income or gains. They may have remitted those funds into the UK and triggered a tax liability on acquisition. If the individual then disposes of the cryptoasset and makes a gain, then the gain may also be taxable in the UK, without the benefit of the remittance basis of taxation.

Tax Treatment of Cryptoassets for Companies

Numerous transactions in cryptoassets by a company will invariably be regarded as trading for tax purposes. These profits will be subject to corporation tax at the current rate applicable (currently 19% for 2021 financial year). Any losses arising from cryptoassets are dealt with in the same manner as a trading loss.

However, if a business is not trading in cryptoassets, any profits will be treated as a chargeable gain for the company. The calculation of the gain would follow the pooling rules which also apply to shares and securities.

How Can Dixcart Help?

We are aware that HMRC are showing an increasing interest in cryptoassets and a planned ‘nudge letter’ campaign will reportedly target UK taxpayers who may have failed to properly pay tax on their cryptoassets. 

HMRC are now armed with data gathered from cryptoasset exchanges and other sources, meaning that investigations into the UK tax affairs of crypto investors are likely to be imminent. 

Any taxpayers who receive a ‘nudge letter’, or who may generally be concerned about their tax position, in respect of cryptoassets, should contact Paul Webb in  the Dixcart office in the UK: advice.uk@dixcart.com as soon as possible to discuss the position.

The Dixcart Tax Team in the UK office is a busy department, largely due to the fact that many of the vehicles and individuals to whom we provide advice, have a UK element and/or assets in the UK.

The three members of the UK Tax Team, we are introducing you to today are; Paul Webb, Karen Dyerson and Ravi Lal.

Tax Advice

Prior to many decisions being taken, they should be considered and evaluated with a thorough knowledge of the potential tax implications

Advice to UK and non-UK domiciliaries on; inheritance tax, UK property ownership matters, and ongoing UK residence tax status, are important aspects of individual tax planning.

Corporates also need expertise regarding tax efficient UK share schemes, the tax aspects of mergers and acquisitions and working with maximising the tax relief available under the UK R&D and Patent Box regimes.

Paul Webb

paul.webb@dixcart.com

Director

CTA ATT BSc (Econ)

After gaining an honours degree in Economics, Paul Webb qualified as a member of the Chartered Institute of Taxation in 2001. Paul has a broad base of tax knowledge and advises both clients and other tax practitioners, both in the UK and around the world.

Paul joined the Dixcart Group in February 2013 and is based at the Dixcart office in the UK. He uses his extensive technical knowledge to help a varied portfolio of clients deal with their tax obligations in an efficient manner.

Paul was made a Director of Dixcart International Limited in 2014 and heads up the tax department in the UK. When travel is permitted he regularly travels to India, and extensively within the UK.

His main areas of expertise are; UK corporation tax, UK personal tax, and domestic and international tax structuring. He works alongside the Dixcart Immigration Department to assist non-UK domiciliaries and their families during their planning for a move to the UK, or when making an investment into the UK. Once in the UK, he advises internationally mobile individuals regarding the use of the UK remittance basis of taxation.

Paul also provides expertise to UK and non-UK domiciliaries on inheritance tax planning, UK property ownership matters, and ongoing UK residence tax status, if needed.

He invariably works with clients from the very early stages of tax planning and subsequently manages ongoing tax matters across the following years.

In recent years, Paul has been involved in establishing tax efficient UK share schemes, advising clients on the tax aspects of mergers and acquisitions and working with clients to maximise the tax relief available under the UK R&D and Patent Box regimes.

Karen and Ravi work closely with Paul and provide tax advice to both corporate and individual clients. They are both experienced professionals and assist on various tax matters such as corporation tax and R&D for businesses and income tax, capital gains tax and inheritance tax for individuals.

Karen is a member of theAssociation of Tax Technicians and has been qualified for over 25 years.

Ravi worked for a top 15 UK accountancy firm prior to joining Dixcart, working in all aspects of tax compliance including self-assessment, corporation tax, tax planning, P11Ds, PSA and ATED.

Additional Information

If you have a question regarding UK tax obligations, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, or have a question in relation to UK corporate tax, please contact Paul Webb: advice.uk@dixcart.com.

Since Dixcart has partnered with Mondaq at the start of 2021, we have received three significant Mondaq Awards:

• Most Popular Article in Switzerland (March 2021): ‘Why is Switzerland a Favoured Location for a Family Office?’
• Most popular Article in Malta (June 2021): ‘Malta Funds – What are the Benefits?’

These awards are given to articles which receive the highest readership figures, per month, for a particular jurisdiction.

Mondaq receives content from a huge range of firms, so these awards are a big achievement!

Dixcart News features a selection of topical articles each month. Our professional advisers create current and relevant content, which is shared with other intermediaries, as well as high-net-worth clients and their families.

This year we are also partnering with Mondaq who share our content across a large range of professional media platforms.

On Thursday 29^th April 2021, the Council of Europe’s Anti-Money Laundering (AML) committee (MONEYVAL) voted in favour of a final report on Malta’s AML and terrorism- financing safeguards.

MONEYVAL, is a permanent monitoring body of the Council of Europe, entrusted with the task of assessing compliance with the principal international standards to counter money laundering and the financing of terrorism and the effectiveness of implementation measures. It is also tasked with making recommendations to national authorities in respect of necessary improvements to their systems.

Background

Two years ago, Malta failed an exhaustive test of its anti-money laundering rules and policing and has since been at risk of being put on the ‘grey list’.  There are currently 19 countries on the grey list. Being put on the grey list comes with a strict reform procedure and ‘hand-holding’ by global authorities. The grey list does not imply any economic sanctions but serves as a signal to the global financial and banking system about heightened risks from transactions with the country in question.

AML Reforms

Since then, Malta has introduced a raft of reforms to strengthen their AML regime and address the shortcomings highlighted by the MONEYVAL Report.

Amongst the changes introduced, substantial investment was made in the police’s economic crimes unit which has led to a number of high profile prosecutions in relation to money laundering and other financial crimes.

Malta has significantly ‘stepped up’ its AML rules, demonstrating its commitment to fighting money laundering and terrorism financing and that the jurisdiction can appropriately manage major cases of financial crime and corruption.

What Happens Now?

The news was welcomed by Malta, and the country will now undertake a visit by the Financial Action Task Force (FATF), an intergovernmental organisation set up to combat money laundering. 

Malta has been engaging with FATF since the start of the year, and their team will have a series of meetings with senior officials from Malta’s regulatory and law enforcement bodies, in a week-long visit scheduled for May. 

Additional Information

If you would like further information, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

Background

In 2017, the European Union (“EU”) Code of Conduct Group (Business Taxation) (“COCG”) investigated the tax policies of a large number of non-EU countries, including the Isle of Man (IOM) and Guernsey, against the concept of “good tax governance” standards of tax transparency, fair taxation and anti-Base Erosion and Profit Shifting (“BEPS”) measures.

Although the COCG had no concerns with most of the principles of good tax governance as they relate to the IOM and Guernsey and a number of other jurisdictions that subject corporate profits to zero or near zero rates, or have no corporate tax regimes, they did express concerns regarding the lack of economic substance requirement for entities doing business in and through these jurisdictions.

As a consequence, in November 2017 the IOM and Guernsey (along with several other jurisdictions) committed to address these concerns. This commitment manifested itself in the form of the Substance Requirements which were approved on 11 December 2018. The legislation applies to accounting periods commencing on or after 1 January 2019.

The Crown Dependencies (defined as the IOM, Guernsey and Jersey), issued final guidance (“Substance Guidance”), regarding the Substance Requirements on 22 November 2019, to supplement the key aspects document that had been issued in December 2018.

What are the Economic Substance Regulations?

The core requirement of the Substance Regulations is that an Isle of Man or Guernsey (referred to each as “the Island”) tax resident company must, for each accounting period in which it derives any income from a relevant sector, have “adequate substance” in its jurisdiction.

Relevant sectors include

• Banking
• Insurance
• Shipping
• Fund Management (this does not include companies that are Collective Investment Vehicles)
• Financing & leasing
• Headquarters
• Distribution and service centres
• Pure Equity Holding Companies; and
• Intellectual Property (for which there are specific requirements in high risk

At a high level, companies with relevant sector income, other than pure equity holding companies, will have adequate substance in the Island, if they are directed and managed in the jurisdiction, conduct core income-generating activities (“CIGA”) in the jurisdiction and have adequate people, premises and expenditure in the jurisdiction.

Directed and Managed

Being ‘directed and managed in the Island’ is distinct from the residency test of ‘management and control’. 

Companies must ensure that there are an adequate number of board meetings* held and attended in the relevant Island to show that the company has substance.  This requirement does not mean that all meetings need be held in the relevant Island.  The key points of consideration to meet this test are:

• the frequency of meetings – should be sufficient to meet the business needs of the company;
• how directors attend board meetings – a quorum should be physically present in the Island and tax authorities have recommended that the majority of directors should be physically present.  Furthermore, directors are expected to physically attend the majority of meetings;
• the board should have relevant technical knowledge and experience;
• strategic and significant decisions must be made at the board meetings.

*Board minutes should at a minimum, evidence key strategic decisions being made in the meeting held at the appropriate location.  If the board of directors does not, in practice, make the key decisions, tax authorities will look to understand who does, and where.

Core Income Generating Activities (CIGA)

• t all CIGAs that are listed in the relevant Islands’ Regulations need to be carried out, but those that are, must comply with substance requirements.
• Certain back office roles such as IT and accounting support do not comprise CIGAs.
• In general, the substance requirements have been designed to respect outsourcing models, though where CIGAs are outsourced they should still be carried out in the Island and be adequately supervised.

Adequate Physical Presence

• Demonstrated by having adequately qualified employees, premises and expenditure on Island.
• It is common practice that the physical presence can be demonstrated through outsourcing to an Island-based administrator or corporate service provider, though such providers cannot double-count their resources provided.

What Information is Required to be Provided?

As part of the income tax filing process, companies carrying on relevant activities will be required to provide the following information:

• business/income types, in order to identify the type of relevant activity;
• amount and type of gross income by relevant activity – this will generally be the turnover figure from the financial statements;
• amount of operating expenditure by relevant activity – this will generally be the company’s operating expenditure from the financial statements, excluding capital;
• details of premises – business address;
• number of (qualified) employees, specifying the number of full-time equivalents;
• confirmation of the Core Income Generating Activities (CIGA), conducted for each relevant activity;
• confirmation of whether any CIGA has been outsourced and if so relevant details;
• the financial statements; and
• net book value of tangible assets.

The legislation in each Island also includes specific powers to request additional information in relation to any substance information provided on or with the income tax return.

The legislation allows the Income Tax authorities to enquire into the income tax return of a corporate taxpayer, provided notice of the enquiry is given within 12 months of the receipt of the income tax return, or amendment to that return.

Failure to Comply

It is important too, that clients continue to monitor company activity to ensure ongoing compliance with the substance requirements, as a company may not be subject to the substance test in one year but fall into the regime in a subsequent year.  

Sanctions can be imposed including penalties between £50k and £100k for a first offence, with additional financial penalties for a subsequent offence.  In addition, where the Assessor believes there is no realistic possibility of a company meeting the substance requirements, he may seek to have the company struck off the register.

Can you Opt-out of Tax Residence in the Island?

In the Isle of Man, for instance, if, as is often the case, such companies are in fact tax resident elsewhere (and registered as such), the board of directors could elect (within section 2N(2) ITA 1970) to be treated as non-IOM tax resident. This means they will cease to be IOM corporate taxpayers and the Order will not apply to those companies, although the company will still exist.

Section 2N(2) states ‘a company is not resident in the Isle of Man if it can be proven to the satisfaction of the Assessor that:

(a) its business is centrally managed and controlled in another country; and

(b) it is resident for tax purposes under the other country’s law; and

(c) either —

• it is resident for tax purposes under the other country’s law under a double taxation agreement between the Isle of Man and the other country in which a tie–breaker clause applies; or
• the highest rate at which any company may be charged to tax on any part of its profits in the other country is 15% or higher; and

(d) there is a bona fide commercial reason for its residence status in the other country, which status is not motivated by a wish to avoid or reduce Isle of Man income tax for any person.”

In Guernsey, as in the Isle of Man, if a company is and can evidence it is tax resident elsewhere, then it can file a ‘707 Company Requesting Non Tax Resident Status’, to be exempt from complying with the economic substance requirements.

Guernsey and the Isle of Man  – How Can we Help?

Dixcart has offices in Guernsey and the Isle of Man and each are fully conversant with the measures that have been implemented in these jurisdictions and have been assisting its clients in ensuring adequate substance requirements are met.

Should you require additional information regarding economic substance and the measures adopted please contact Steve de Jersey in our Guernsey office: advice.guernsey@dixcart.com, or Paul Harvey in the Dixcart office in the Isle of Man regarding application of the substance rules in this jurisdiction: advice.iom@dixcart.com

Should you have a general question regarding economic substance please contact: advice@dixcart.com.

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission. Guernsey registered company number: 6512.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

The Covid-19 Pandemic

2020 is going to be a year remembered for the challenging pandemic, which has had a huge impact on people’s well-being, both health wise and financially.

On a positive note, people are appreciating the ‘simple’ things in life and there is a heightened attitude of looking out for and assisting others, particularly those falling into the vulnerable category.

Most Governments have taken sympathetic measures to support their health services and to try to keep business functioning during the challenging circumstances.

Measures taken in the Jurisdictions where Dixcart has Offices

Please see below a summary of the support measures being taken in the eight key jurisdictions where Dixcart has an office. This is by no means a comprehensive summary, rather an outline of some of the innovative measures being taken and is only relevant at the time of publication.

Cyprus

• Suspension of the collection of loan instalments and interest until the end of 2020.
• Central Bank of Cyprus guidelines to banks to provide short-term
  liquidity facilities, for up to 12 months, at preferential terms
  (interest rate and other charges). A maximum amount, to be available of
  double the annual payroll cost, or 25% of the entity’s most recent
  annual turnover.
• Special plan for a ‘Full Suspension of Business or Partial
  Suspension of Operations’ – payment of a Special Unemployment Benefit to
  private sector employees.
• Special Self-Employed Benefit, a similar concept to the above payment.
• ‘Child Care Special Leave Allowance’ to be awarded to working
  parents who are responsible for the care of children up to 15 years of
  age and / or children with disabilities of any age and due to the nature
  of their work cannot work from home.

 Guernsey

• As of 19 March, a requirement was imposed on all persons arriving in
  the Bailiwick from anywhere in the world (including, for the avoidance
  of doubt, Jersey and the United Kingdom), to self-isolate for 14 days on
  arrival. This is a legal requirement, and failure to comply is a
  criminal offence.
• Testing and contact tracing have formed a major part of the response
  strategy. Guernsey has employed a high rate of testing, several times
  more per capita than many other jurisdictions.
• Deferral of payment of Social Security contributions for both Quarter 1 (due mid-April), and Quarter 2 (due mid-July).
• ‘Coronavirus Payroll Co-Funding Scheme’ – the Government will pay
  employees an amount equivalent to Guernsey’s minimum wage. For a 35-hour
  week, this figure equates to a gross figure of £298. The States of
  Guernsey will meet 80% of this figure (i.e. £238 per week based on a
  35-hour week). Employers must make up the remaining 20%.
• ‘Small Businesses and Self-employed Grant’ – the amount payable will be a flat sum of £3,000.
• A loan guarantee scheme to enable further financial support for trading businesses with a turnover of less than £10m.
• Commencement of phased relaxation of lockdown rules with businesses
  and workers for certain types of business able to operate from 25 April
  2020, if public health requirements on social distancing and hygiene are
  met.
• There is a weekly national ‘clap’ for the National Health Service,
  at 20.00 (GMT), every Thursday evening. Individuals and families stand
  outside their homes (preserving social distancing), or at their open
  windows and clap to show appreciation for healthcare workers and carers.

Isle of Man

• As of 6am on Friday 27 March 2020, the Isle of Man’s borders closed
  to passengers, until further notice. The only exception is the return of
  Manx residents from overseas. 
• To help viable businesses that have been affected to retain staff, a
  wage support package is available for 12 weeks, to provide businesses
  with a flat rate contribution of £280 per week for every full-time
  equivalent staff member.   
• ‘Business Adaptation Grant’ – £3.5m is being made available to
  support businesses looking to evolve. 50% of any costs will be met, that
  can be shown to be involved in the adaptation of a business, as a
  result of changing market conditions due to the Coronavirus outbreak –
  the business must also have a viable business plan going forward
• A range of support measure are available from Manx Utilities
  Authority, Manx Telecom, Sure, and Manx Gas, for individuals who are
  being affected.

 Malta

• A two-month deferral for businesses, including the self-employed, to
  pay: Provisional Tax, VAT and National Insurance Contribution on
  salaries.
• €900 million has been provided in bank guarantees, for companies
  requesting operational loans. These loans will enjoy low interest rates
  and longer repayment periods.
• Employers and self-employed individuals investing in technology that
  enables working from home, can claim to partially cover the costs of
  this investment.
• Full-time employees of businesses and self-employed individuals,
  operating in sectors that have suffered drastically due to the COVID-19
  pandemic, will be entitled to up to five days’ salary a month,
  equivalent to a maximum €800 per month, to be financed by the Maltese
  Government. Part-time employees will be eligible to a maximum €500 per
  month.
• The government has increase rent subsidies for individuals whose jobs have been terminated.
• Companies that operate in adversely affected sectors and
  have suffered 25% loss in turnover will be entitled to one days’ salary
  per week equivalent to €160 per month per member of staff.

 Portugal

• The Portuguese Government declared a State of Emergency on March 18 and it is currently in place until 2 May 2020.
• A mandatory restriction on movement and measures relating to social isolation have been put in place.
• Commercial passenger flights are not permitted during the State of
  Emergency, except for emergency or repatriation purposes. Individuals
  cannot cross between Spain and Portugal for leisure or tourist purposes.
• As at the end of April, Social Security Lay-off Payments have been
  approved for over 40,000 companies. The average amount to be paid is
  €422 per employee per month.

 Switzerland

• On March 25 the Swiss Government extended entry restrictions to all
  Schengen and non-Schengen states except Swiss nationals and foreigners
  with Swiss permits.
• Salaries for the month of March are guaranteed, although in some cases there might be delays.
• In total the government has set aside around CHF62 billion to
  support the economy. On April 3, it announced it was doubling the amount
  of emergency loans available to struggling companies to CHF40 billion
  ($41 billion). It has since presented a plan to offer additional loans
  of up to CHF154 million for start-up companies.
• A grant to cover 80% of wages (up to CHF 12,350 per month), for
  employees who are not working due to the impact of Coronavirus but are
  retained on the payroll. This will be backdated to 1^stMarch 2020 and will be open for a maximum one-year period.
• The self-employed will be assisted for 2 months. They will receive CHF 5,880 maximum per month, backdated to 17 March 2020.
• Since the beginning of the crisis, Switzerland has increased testing
  for the coronavirus to achieve one of the highest per capita rates.
• A three-step easing of emergency lockdown measures began on April
  27. With protection measures for staff and customers, hair stylists,
  beauticians and physiotherapists can re-open their doors, along with
  florists and garden/DIY stores. Dental and medical centres can offer
  non-urgent care. Bars, restaurants, museums, libraries and markets will
  reopen on 11 May.
• The ban on gatherings of more than five people remains in place.

UK

• As of the end of April, the British Government has announced that a
  phased and gradual easing of lockdown restrictions will take place,
  starting May 2020.
• A grant to cover 80% of wages (up to £2,500 per month), for
  employees who are not working due to the impact of Coronavirus but are
  retained on the payroll. This will be backdated to 1^stMarch 2020 and was open initially for a three-month period, now extended to 30^th June 2020.
• No business will have to pay any VAT from the third week in March
  2020, until mid-June. The payment will be deferred, and businesses will
  have until the end of the 2020-21 tax year to settle any liabilities
  that have accumulated during the deferral period.
• The Coronavirus Business Interruption Loan Scheme (CBILS) was launched on Monday 23^rdMarch
  2020. Loans will be delivered by lenders that partner with the British
  Business Bank, including all of the major banks. The lender will receive
  a guarantee of 80% of the loan amount from the government. The loan
  will be interest free for the first 12 months.
• No ‘rates’ will payable to local authorities for the 2020-2021 tax
  year, for any business in the retail, hospitality or leisure sectors.
• There is a weekly national ‘clap’ for the National Health Service,
  at 20.00 (GMT), every Thursday evening. Individuals and families stand
  outside their homes (preserving social distancing), or at their open
  windows and clap to show appreciation for healthcare workers and carers.
  It is a moving experience.

 Assistance

All of the Dixcart offices are fully operational.

Each office can provide you with an update on the status in their particular jurisdiction and can give advice in terms of applying for appropriate financial assistance. Please speak to you usual Dixcart contact or alternatively email: advice@dixcart.com.