1 Developments in the Channel Islands

1.1 2019 Tax Returns

Details of the information which will be requested in relation to economic substance on the Guernsey company tax return has been published by Guernsey's Revenue Service and will be of relevance to any company which falls within the scope of the substance legislation and will apply to accounting periods on or after 1 January 2019. 

The disclosure requirements contained in the publication are consistent with the equivalent disclosures which were published in April by the States of Jersey – see the Jersey guidance here.

The publication also sets out expectations in relation to filing of financial statements and how to deal with this where companies prepare consolidated financial statements. The Guernsey guidance can be found here.

1.2 Mandatory Disclosure Regime


On 23 September 2019, the Department for the States Treasury and Exchequer issued a consultation seeking feedback on the implementation of the Government of Jersey's commitments to the EU Code of Conduct Group (Business Taxation) to introduce Mandatory Disclosure Rules (MDR).  MDR is due to be implemented by 31 December 2019 as part of the ongoing commitment to transparency and cooperation. Feedback should be sent to the tax policy unit by 1 November 2019.  A link to the consultation is here.

By way of background, the Government of Jersey (and the governments of Guernsey and Isle of Man), pledged to introduce legislation by the end of 2019 in response to the EU Code of Conduct Group (Business Taxation) (Code Group) reviewwhich suggested MDR as a further transparency measure in addition to rules on economic substance which were implemented as of 1 January 2019 (see our previous briefing for the latest on economic substance rules). It is anticipated that Jersey, Guernsey and the Isle of Man, will implement MDR in a way which allows for a consistency of treatment across the three Crown Dependencies.

The consultation document sets out the preference of the Government of Jersey to implement MDR based on the OECD model, rather than the EU's DAC 6 (see paragraph 2.1 below). 

The intention is for the information collected under the MDR to be exchanged by Revenue Jersey with relevant jurisdictions, subject to legality of such sharing of data.


Guernsey's Revenue Service has issued a briefing note on MDR in relation to OECD CRS MDR (i.e. Model Mandatory Disclosure Rules on CRS Avoidance Arrangements and Opaque Offshore Structures) which you can see here.

The briefing note sets out a high-level description of the most relevant requirements of the OECD CRS MDR and gives several scenarios to provide an indication of what would or would not be reportable under Guernsey MDR rules.  Guernsey's Revenue Service acknowledges the need for further guidance and that guidance notes are likely to be produced in conjunction with Jersey and the Isle of Man.

The relevant legislation will be introduced before the end of 2019.

2 Global developments potentially impacting Channel Islands vehicles

2.1 Transposition of DAC 6

The UK government has launched a consultation on draft regulations implementing DAC 6 (Council Directive (EU) 2018/822).

DAC 6 introduces a new obligation for EU intermediaries, and taxpayers in some cases, to disclose certain cross-border arrangements to local tax authorities that are then shared with other EU tax authorities. Cross-border arrangements will be considered reportable if at least one of the "hallmarks" is satisfied, including transactions involving companies not effectively subject to tax. Although the reporting obligations under DAC 6 become effective on 1 July 2020, with the first reports due by the end of August 2020, intermediaries and taxpayers should be mindful of the "look-back" period in DAC 6 that effectively extends reporting to all arrangements entered into after 25 June 2018.

2.2 Liquidity Stress Testing for Investment Funds – simulation framework developed by ESMA

The European Securities and Markets Authority (ESMA) developed a framework to be used for stress simulations for the investment fund sector.  There are guidelines on liquidity stress tests in UCITS and AIFs as well as stress testing requirements for Money Market Funds. The Final Report can be found here. The guidelines can be found in Annex III.

2.3 Sustainable Investment and Impact Funds

Ogier has established a dedicated Sustainable Investing and Impact Funds team which works with asset managers, corporates and investors which are looking to incorporate environmental, social and governance (ESG) factors into their operations and/or investment processes. Our team is committed to providing thought leadership in this area. Details about our Sustainable Investing and Impact Funds practice and services offered by the practice can be accessed here.

This dedicated new team will become increasingly relevant following new rules on disclosure requirements for sustainable investments and sustainability risks agreed by the European Parliament and EU Member States earlier this year, which are expected to be effective in early 2021.

3 Jersey developments

3.1 Ogier attended Jersey Finance Annual London Funds Conference

Partners Emily Haithwaite and Sophie Reguengo and Senior Associate Tatiana Collins from our IFLR top-tier funds team attended the Jersey Finance Annual London Funds Conference on 10 September 2019. This year's Jersey Finance Funds Conference included in-depth discussions of the major initiatives impacting the funds sector and also explored the increasingly global outlook of funds professionals looking to future-proof their funds.

Expert panelists, chaired by Sophie, examined what initiatives are creating caution and how these could be mitigated, as well as the impact of the UK's new capital gains tax rules, the importance of tax transparency in structuring and how the real estate industry is helping to meet global challenges.  Please reach out to Sophie if you would like to discuss further. 

Sophie discusses the key takeaways from her panel session in this video.

3.2 New record high for Jersey's funds sector

The value of regulated funds serviced in Jersey rose by 7% to a new record high in the first half of 2019, according to the latest figures from JFSC.

Figures for the second quarter of 2019 (ending 30 June 2019) show that the net asset value of regulated funds under administration in Jersey grew by £22.1bn over the first six months of the year to stand at £342.1bn, a new record high and a figure that has grown by more than 70% over the past five years.

The alternative asset classes continue to perform strongly, recording a combined rise over the first six months of 2019 of 6% to represent 85% of Jersey's total funds business. There was growth in the private equity, real estate, infrastructure, credit and debt asset classes, while there was a decrease in hedge funds.

The latest quarterly figures come shortly after it was announced at Jersey Finance's Annual London Funds Conference that the number of registered Jersey Private Funds (JPF) had grown by 25% over the half year to 257, with assets under management (AuM) of £43bn – more than double the value at the end of 2018 (£19.4bn). The figures for JPFs, a regime that was introduced in 2017, are in addition to the numbers in the quarterly statistics meaning that the true AuM in the funds sector is £385.1bn.

The stability Jersey can provide, together with its expertise, appropriate regulatory framework and global market access to capital markets is clearly resonating with managers, making Jersey an attractive option for alternative fund structuring.

3.3 Outsourcing findings

In July 2019, the JFSC published a feedback paper on the key findings from the outsourcing themed examination undertaken by the JFSC's Supervision Examination Unit.

Under the Outsourcing Policy and Guidance Notes (the OPGN), a registered person is fully responsible and accountable to the JFSC for any outsourced activity to the same extent as if the outsourced activities were not outsourced and must not, as a consequence of outsourcing arrangements, become a 'letterbox' entity. Compliance with the OPGN may be taken into account by the JFSC when considering whether a Person is deemed fit and proper in terms of its structure and organisation.

The feedback paper highlighted the areas that required improvement but also provided examples of good practices identified by the JFSC from the themed examination which included: (i) conducting gap analyses of the outsourcing arrangements and the six core principles; (ii) existence of comprehensive written agreements detailing the term of engagement in respect of the service providers within the same group as registered persons; (iii) existence of comprehensive policies and procedures able to demonstrate consideration of the Jersey regulatory requirements; (iv) engaging with the JFSC at an early stage, allowing the JFSC sufficient time to review and assess the possible regulatory implications of the proposed outsourcing arrangement and ensuring that JFSC has unrestricted access to information in respect of the outsourcing arrangements.

3.4 Sharia compliant funding

The tax authorities in Jersey have provided certainty of tax treatment for Sharia compliant financing structures by issuing a Statement of Practice in July 2019. The Statement of Practice confirms that financing structures materially in the form of an illustrative Tawwarruq or Murabaha structure will not be within the scope of Article 123D(4)(e) of the Income Tax (Jersey) Law and, accordingly, will be non-taxable.

A copy of the Statement of Practice can be accessed here.

3.5 Civil Financial Penalties on Principal Persons

Following consultation earlier in the year, the JFSC issued a feedback paper on proposals to revise the JFSC's Statement of Principles and Processes for civil financial penalties. The feedback paper can be found here.

As a result of the consultation, the JFSC has released its updated methodology describing its guideline approach to determining the civil financial penalty to be imposed on a principal person.

In the revised methodology, the JFSC sets out 11 steps for determining the amount of penalties (the maximum penalty being £400,000). The steps include factors such as the seriousness of the breach, the penalties applied in other cases, and the financial consequences of the penalty to the person and other parties, as well as discounts for early settlement.

A link to the methodology can be found here.

3.6 Jersey's Domestic Legal Framework and Tax Regime Receives OECD Support

Following a review carried out by the Organisation for Economic Co-operation and Development (the OECD), it was concluded that Jersey's domestic legal framework is in line with the relevant standard and is consequently "not harmful".

3.7 UK Parliamentary review finds Jersey's beneficial ownership information sharing effective

Following an 18 month statutory review, it was announced that Jersey's ability to share company beneficial ownership information with the UK's law enforcement agencies is effective. The review focused on the 'Exchange of Notes' with the UK, which are bilateral arrangements that enhance the effectiveness of cooperation between law enforcement agencies.

Jersey has had a central company register populated by accurate, verified and up-to-date data for some 30 years, so the positive assessment of Jersey reinforces that Jersey is serious about its responsibility in tackling financial crime and the review specifically praised Jersey for being an example of best practice.

3.8 Data Protection

In August 2019, the Jersey Office of the Information Commissioner (JOIC) published a release informing local businesses about the local implications of the US (Clarifying Lawful Overseas Use of Data) Act (Cloud Act).  It was highlighted that the US authorities cannot legally rely on the Cloud Act alone to force an entity in Jersey to disclose a person's data.  The disclosure must be handled in accordance with the Data Protection (Jersey) Law 2018.  A copy of the release can be accessed here.

Further, in September 2019, JOIC announced the launch of an application for Apple and Android  devices aimed to provide individuals and organisations in Jersey with the easiest possible experience when accessing resources and guidance about Jersey data protection laws and their relationship with the General Data Protection Regulation.  A copy of the announcement can be accessed here.

3.9 Updated Brexit Report presented to States of Jersey to mitigate domestic impact of "no deal" exit

On 16 July 2019, the Minister for External Relations presented an updated report to the States in relation to Brexit. The report aims to provide an update on the ongoing work that the Government of Jersey is doing to prepare Government, residents and businesses for the UK's exit from the EU (including preparations for a day one no deal), and to ensure the Island is 'negotiation ready' for the Phase 2 Future Partnership negotiations. A business readiness checklist has been prepared in close collaboration with Jersey business and the Jersey Chamber of Commerce, covering a range of topics.  Please find a link to the checklist here.

The Government of Jersey has also published a Jersey Brexit Ready guide, which can be found here.

4 Guernsey developments

4.1 Second quarter investments statistics 2019

The net asset value of total funds under management has increased during the last quarter by £16 billion (5.5%) to £295.9 billion and over the past year, total net asset values increased by 7.1% (£20 billion).

Guernsey domiciled open-ended funds increased over the quarter by £4.8 billion, which represents an increase of £4.1 billion over the year since 31 June 2018.  Closed-ended funds also experienced an increase of £6.2 billion over the last quarter, representing an increase of £12.2 billion over the year since 31 June 2018.

Non-Guernsey schemes, for which some aspects of management, administration or custody is carried out within the Bailiwick of Guernsey, has a net asset value of £68.2 billion at the end of the quarter.

4.2 Proposal to create a single Fiduciary Handbook and revise Pension Rules

The Guernsey Financial Services Commission (the GFSC) has issued two consultation papers seeking feedback on potential changes to the regulatory framework under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 (as amended) (the Fiduciaries Law) with the objective of ensuring that the regime continues to be compliant with international standards and appropriate for the Guernsey market.

The consultation papers make detailed proposals for the revisions and consolidation of elements of the policy framework underlying the Fiduciaries Law, specifically:

The consultation papers make detailed proposals for the revisions and consolidation of elements of the policy framework underlying the Fiduciaries Law, specifically:

(a) reframing the Codes of Practice as a single Fiduciary Handbook which will seek to simplify the rules framework from six separate documents into one, including the consolidation of the conduct of business elements of existing Pension Rules within the new single Fiduciary Handbook; and

(b) revising the current Pension Rules to reflect industry feedback.

The GFSC has requested responses to the consultation papers by 7 November 2019.

4.3 Section 3(1)(y) of the Fiduciaries Law

The GFSC has announced that it will be amending the approach to specific discretionary exemptions (an exemption) granted under section 3(1)(y) of the Fiduciaries Law in two ways:

1) To clarify the extent of an exemption

An exemption will only apply to the specific regulated activity in relation to the target asset, as disclosed in the exemption application. If there is any material change to the structure, a new application and fee must be submitted to the GFSC. A 'material change' will be considered to be any change in the activity or parties within the structure, save for those detailed below.

If there is to be a change to the administrator of the exempt entity, then, in accordance with the condition imposed on the exemption when granted, the GFSC will need to be notified of the identity of the new administrator. The additional connected parties for whom the exempted entity will be acting, will also require notification to the GFSC.  Neither circumstance will require a fee to be paid.

2) To apply a 3 year time limit to an exemption

An exemption will expire 3 years from the date it is granted, if it has not been revoked beforehand.

Where there has been no change to the structure detailed within the original application a written renewal request, confirming the structure and associated parties, must be submitted to the GFSC by no later than one month before the expiry date.  A fee will not be required in such circumstance and subject to satisfactory review, a renewal letter will be reissued for a further 3 years.

If the activities or individuals involved are to be amended or there has been a material change which has not been notified in accordance with above, a new application form and fee should be submitted to the GFSC by no later than one month before the expiry date.

The 3 year time limit only applies from 1 October 2019. No action is required for existing exemptions.

For further information regarding the above changes please speak to your usual Ogier contact.

4.4 The Network for Greening the Financial System

The GFSC's application for membership of the Network for Greening the Financial System (the NGFS) has been successful.  Guernsey is the first island International Finance Centre to achieve membership of the NGFS in a move consistent with the international engagement element of Guernsey's green finance strategy.

The NGFS was established following the "One Planet Summit" in Paris in December 2017 by eight central banks and supervisors. Since then, it has grown to forty-two members and eight observers, representing five continents.

The purpose of the NGFS is to help strengthen the global response required to meet the goals of the Paris agreement and to enhance the role of the financial system in managing risks and mobilising capital for green and low-carbon investments in the context of environmentally sustainable development.  It aims to accelerate the work of central banks and supervisors on climate and environmental risk and on the scaling up of green finance in order to contribute to the development of environment and climate-related risk management within the financial sector.

As a new member, the GFSC will play an active role in NGFS meetings and will take the opportunity to highlight the important contributions that International Finance Centres can make to help achieve the aims and objectives of the NGFS.

4.5 Guernsey considers introduction of Limited Liability Companies

Guernsey is proposing to adopt limited liability companies (LLCs) in an attempt to enhance the island's competitive position in the United States.

The States of Guernsey has undertaken a consultation exercise to consider  whether the island should follow other international financial centre jurisdictions in introducing LLCs. The consultation tested the level of demand for LLC legislation in Guernsey and sought to identify the potential economic benefits, as well as gathering proposals and core features of the legislation.

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