Guernsey and Jersey are fleet-footed and professional in the way they respond to international initiatives, to ensure their jurisdictions remain attractive and at the forefront of developments in international finance.

During 2012 the Channel Islands have faced numerous challenges, with potential for a detrimental effect on businesses in the finance and allied sectors, including:

  • the rise of the "Zombie" and the overhaul of tax on high value residential property;
  • the removal from 1 April 2012 of lowvalue consignment relief with respect to VAT; and
  • changes to the tax treatment of qualifying recognised overseas pension schemes, with effect from 6 April 2012.

Here we explore further some of the larger international issues that will continue to affect the Channel Islands.


Halloween may be over, but the UK government is concerned that the country has been overrun by the undead. In March 2012, the government declared war on 'non natural persons' (Zombies) buying high-value properties. Zombies, as we have come to know them, are, to all intents and purposes, overseas companies.

Contrary to popular belief, banging them on the head is not the appropriate way to destroy zombies. The answer instead lies in new property taxes. In 2012 the government introduced new Stamp Duty Land Tax (SDLT) thresholds of 7% for individuals and 15% for Zombies buying residential property worth more than £2 million. The government also announced proposals for a new Annual Tax and the introduction of Capital Gains Tax, both of which were subject to a consultation period which has now ended. The draft Zombie killing legislation is anticipated in mid-December.

The UK government was concerned that Zombies were being used to buy up high value residential property in the UK. Wealthy people were then selling their Zombie on to someone else, thereby avoiding SDLT. In practice, this was not commonplace. The main drivers for holding property using a Zombie, were to give non-UK residents privacy and also comfort, that following their death, their heirs would not face a significant (40%) Inheritance Tax bill - turning the traditional image of a Zombie being a bad thing on its head.

Despite that, the changes to SDLT were introduced earlier this year and the proposed Capital Gains Tax and Annual Tax are set for 2013.

This does not just affect people buying property now; it affects everyone who owns property in a Zombie in England and Wales worth more than £2 million. Zombies will also be hit by an annual tax of £15,000 for properties up to £5 million, rising to £140,000 for properties worth over £20 million. When the Zombie comes to sell the property, it could also be hit potentially by capital gains tax.

If you or your clients already own high value residential property using a Zombie it is vital that you review each structure, to determine whether it remains appropriate. The key is to be prepared, so you can take early decisions on whether restructuring is necessary.


Guernsey, Jersey and the Isle of Man recently announced that they would negotiate partnership agreements with the US to implement its Foreign Account Tax Compliance Act (FATCA) encouraging tax compliance on a global basis, similar to the agreement between the UK and the US signed in September.

The Crown Dependencies are taking a common approach, which will be welcomed by much of the industry and especially those who have offices in two or more of the islands.

The news also follows the joint statement from the UK, US, France, Germany, Italy and Spain on a standardised approach to FATCA compliance from February 2012, which stresses the key policy objective of FATCA of increasing reporting to the US tax authorities.


A vast amount of work is being done by the Channel Islands' combined funds industry to ensure that the jurisdictions are at the forefront of developing an appropriate offshore solution to the Alternative Investment Fund Managers Directive (AIFMD). Extensive consultations have been held and technical proposals have been developed in principle and are ready for implementation in detail.

The AIFMD introduces a passport to allow the flexible marketing of Alternative Investment Funds (AIFs) to professional investors across the EU. Passports will be introduced for EU Alternative Investment Fund Managers (AIFMs) when the directive goes live in July 2013, with passports for non-EU AIFMs anticipated from 2015.

From July 2013, national private placement regimes in individual EU member states can remain in place for non-EU funds being marketed into the EU by non-EU AIFMs, provided there are certain co-operation agreements in place with the regulator of each Member State where AIFs are to be marketed. Many Guernsey and Jersey funds are already actively marketed into the EU this way. Both islands currently have bilateral cooperation agreements with the majority of key EU member states, providing confidence that they will be able to sign co-operation agreements with the regulators of individual member states as soon as possible.

Both Guernsey and Jersey intend to continue to offer fund management and services on a business-as-usual basis. Jersey's industry, government and the regulator are intensively engaged on AIFMD and have been working jointly to identify all steps that need to be taken to preserve Jersey's funds industry and build on the opportunities that the AIFMD presents. Guernsey government is also keenly aware of the importance of timely and well-regulated implementation of appropriate procedures in Guernsey.

Beyond private placement regimes, the Channel Islands are also on the front foot. The Channel Islands won't be able to, and won't need to, obtain an EU-wide AIFMD passport before 2015 – but they are well placed to do so by then. Both islands are aiming to be in the first tranche of nations to sign up to the agreements required to be fully AIFMD-compliant and intend to have a fully compliant regime ready to go ahead of the 2015 date for non-EU countries.

In summary, hard work is being carried out by both Guernsey and Jersey to ensure they stay ahead of the curve in meeting the challenges of the international finance community touching both jurisdictions, either directly or indirectly.

If your business is affected by these developments and requires planning to minimise the risk, please speak to your regular contacts at Collas Crill so that we can work together to arrive at a solution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.