Categories for Industry News

Economic Substance – guidance notes

The Revenue Service, along with the other Crown Dependencies, have updated their Guidance Notes on Economic Substance. This follows further discussions with the Code of Conduct Group (Business Taxation) (“COCG”) regarding the application of elements of the economic substance rules (see: www.gov.gg/economicsubstance ). The key changes in version 2.0 of the guidance notes are:

Changes with general application:

In a number of circumstances it is the making of decisions that is the Core Income Generating Activity (“CIGA”) that the company needs to undertake. In light of this, there has been concern regarding the applicable analysis where a decision is made outside of the Island and whether this would be enough to result in the CIGA being undertaken outside the Island; it is welcome therefore that guidance notes v2.0 state: “The taking of decisions outside the Island would generally indicate performance of CIGA outside the Island. However, isolated decisions may be taken outside the Island provided that it can be evidenced that the decisions taken and the CIGA undertaken in the Island are of a quality and quantity to clearly outweigh the question that the CIGA involving the decisions is undertaken outside the Island.” (original emphasis).
Further information on the sanctions (penalties, exchange of information and company strike-off) available to the revenue authorities has been outlined – making it clear which competent authorities information will be exchanged with and that financial penalties will be increased in cases of repeated failure to meet the test. Guidance notes v2.0 also makes it absolutely clear that information will always be exchanged with relevant competent authorities in respect of high-risk IP companies, irrespective of whether they have passed the test.
The treatment of Protected Cell Companies (“PCCs”) and (“ICCs”) under the economic substance rules is clarified – PCCs being treated as a single company under the rules, whereas an ICC and each of its incorporated cells will be treated as individual companies.

Pure equity holding company relevant activity:

The definition of pure equity holding company is narrowed in the guidance notes to companies whose “sole function” is to acquire and hold shares – this being narrower than the legislative provisions (and the previous version of the guidance notes) which refer to the “primary function” of acquiring and holding shares.
Guidance notes v2.0 also utilise a sentence from the OECD’s Action 5 2017 update report – we understand that this sentence has been included to clarify the point that if a company is undertaking another relevant activity (in addition to the activity of being a pure equity holding company) it must meet the economic substance test in relation to that other relevant activity (i.e. a company which is a high-risk IP company cannot avoid the rules applicable to high-risk IP companies by claiming it is a pure equity holding company).

IP holding relevant activity:

Guidance on IP holding is now included in v2.0; although the specific guidance provided in respect of high-risk IP companies is a reproduction of the guidance previously provided in the “key aspects document”.
In terms of the general guidance on IP holding, guidance notes v2.0 provides a number of examples which seek to explain the different types of IP and the various forms of associated CIGA.
There is a statement that where companies seek to manipulate their income to fall outside of scope this will be addressed and clarification is provided that where, for accounting purposes, IP assets are aggregated within “goodwill”, the company will still be regarding as undertaking IP holding.

Other Activities

Guidance in relation to the relevant activity of insurance has been provided, including further details of the insurance CIGAs have been provided – critically these focus on oversight of the determination of risk and strategic decisions in relation to the provision of client services. Four examples are provided which outline cases which both pass and fail the insurance CIGA tests.
Guidance in relation to the relevant activity of shipping has also been provided. The key element is that to be within the scope of this relevant activity the company must operate one or more ships in international traffic. Therefore the other shipping activities mentioned in the legislation (e.g. management of crew, sale of tickets) are only in scope where the company meets this gateway condition. As guidance notes v2.0 state: “A company which undertakes any of these other activities where the company does not also operate a ship, or ships, in international traffic is not within the shipping relevant sector.”
In the context of the relevant activity of “distribution and service centre” the sentence in the previous version of the guidance notes that the definition did not extend “to cases where [such] activities are not the main activity of a company” has been clarified with the inclusion of the following words: “…but only if that other activity is recharged at cost or less. (For example, where a company seconds staff for a limited period recharging at cost rather than for a profit.)” The revenue authorities have then warned that they will take appropriate action where companies seek to manipulate their income to fall within this exclusion.

In light of the challenges of agreeing the wording with the various stakeholders engaged in this process, it is not believed that further versions of the guidance notes are likely to be released in the near future and hence entities should progress on the basis that this is the maximum amount of guidance that is going to be released.

July Industry News Round-Up

From the UK Home Office and OECD Reports to green finance, it has been another busy month for Guernsey’s finance sector. Here is our monthly newsletter with all of the top stories from the industry and our member organisations.

Don’t forget to follow @GIBAGuernsey on Twitter for updates and news throughout the month.

Minutes and Technical Update

The July GIBA Council minutes are now online in the members’ section of our website. You can find them here.

BUSINESS NEWS

OECD Tax Review

The Organisation for Economic Co-operation and Development (OECD) recently reviewed a number of jurisdictions that have no or low rates of corporate taxation, including Guernsey. The review concluded that Guernsey’s taxation regime is not harmful when reviewed against the OECD’s standards concerning the requirement for legal persons to have sufficient economic substance.

IAIS Report

A report by the International Association of Insurance Supervisors (IAIS) has endorsed the island’s high level of insurance management. The IAIS is one of the principal international standard-setting bodies, to which the Bailiwick has a long-standing commitment.

Guernsey’s New Representative in Westminster

Robert Buckland, the MP for South Swindon, has been promoted to be Lord Chancellor and Secretary of State for Justice. The Ministry of Justice is responsible for managing the constitutional relationship with the Crown Dependencies.

UK Home Office Praise

Guernsey’s information sharing with UK law enforcement agencies was praised by the former UK Home Secretary Sajid Javid.

Private Capital

In the decade following the global financial crisis, allocations to alternative assets such as private equity and venture capital have doubled. We Are Guernsey undertook research revealing the rising significance private capital plays as a source of funds in private equity.

Expat Survey

People moving to Guernsey to work earn more than the average expat and a third find love, according to an HSBC Expat Survey.

GREEN FINANCE

Guernsey Green Fund

We Are Guernsey reported an increased awareness of and interest in green finance. Three quarters of those surveyed had increased exposure in green and sustainable finance – and everyone planned to do so in the near future.

FINANCE IN THE COMMUNITY

The charitable work done by Guernsey’s finance sector continues to support many individuals, groups and services in the community. Follow our Twitter feed and the hashtag #GsyFinance4Community, here are just a few examples:

Doing their #utmost

Guernsey’s Island Games Team supported by Utmost Worldwide enjoyed one of their most successful Games in Gibraltar.

Julius Baer celebrates its 30th anniversary

Julius Baer celebrates its 30th anniversary in Guernsey and to mark the occasion the bank’s staff have taken part in a range of events to raise money for Les Bourgs Hospice.

Read more

BWCI Mini Soccer Festival

The 18th mini soccer festival took place this month, supported by BWCI, and saw more than 200 footballers compete over the two-day festival.

AUGUST/SEPTEMBER DIARY DATES

Channel Island Information Security Forum

“In through the out door: the shocking truth about physical security”

Thursday 15 August 2019

12:45-14:00

With the growing interest in and awareness of cybersecurity, we could be forgiven for thinking that security is all about computers, the internet and hi-tech crime. The reality is that often the easiest way into an organisation and to its data is literally through the front or back door.

Local security expert Carl Ceillam of The Chain Limited will share some of his experiences gained during physical penetration tests that he has performed on local businesses.

More information

Guernsey Chamber August Lunch

Monday 19 August 2019

OGH 12:00-14:00

August’s Chamber Lunch will discuss the proposed Employment and Social Security legislation. Deputy Shane Langlois, Vice-President, Committee for Employment Social Security, and Deputy Emilie Yerby, Member, Committee for Employment Social Security, will answer queries and present insight into this hugely important new area of proposed legislation.

More information

We Are Guernsey Funds Masterclass

18 September 2019

London, 16:00 – 18:00

A panel of experts will discuss the factors behind this trend together with a greater understanding of how fund structures and fund jurisdictions are evolving and how best to meet the growing complexity of requirements and future-proof your business in 2020 and beyond.

More information

June Industry News Round-Up

From beneficial ownership to airport security and passenger numbers, it has been another busy month for Guernsey’s finance sector. Here is our monthly newsletter with all of the top stories from the industry and our member organisations.
Don’t forget to follow @GIBAGuernsey on Twitter for updates and news throughout the month.

GIBA NEWS

Beneficial Ownership

GIBA Chairman Tony Mancini commented on Guernsey’s plans to move towards a public register of beneficial ownership, saying: ‘The issue of public access to our beneficial ownership register is really important for Guernsey’s finance businesses. Our clients have many legitimate reasons for wanting to keep their affairs private and they value the ability that Guernsey has to achieve that in a responsible way.’

Read his full statement here

Passenger Numbers

GIBA, the Institute of Directors and the Chamber of Commerce commented on an increase in Guernsey’s passenger numbers for Q1 2019. The statement expressed a positive response from the three business groups: ‘The improved connectivity and growing traffic numbers are supporting an improvement in sentiment amongst the business community as well as providing meaningful social benefits to islanders.’

Find the statement on our website

Airport Security

GIBA Chairman Tony Mancini also responded to concerns raised in the States of Guernsey regarding the current delays being experienced with airport security at Guernsey airport. He stated that the security seemed to have deteriorated since the recent refurbishment of the security and duty-free area.

The Future of Guernsey’s Finance Sector

GIBA Chairman Tony Mancini shared his thoughts on the future of Guernsey’s finance sector, particularly in relation to the island’s air links and in comparison to Jersey. He said: ‘Much has been written about the problems of Guernsey’s air links, including the debate on the runway and also on the actual routes and connections available. For the finance sector, and by extension the rest of the economy, the perceived and real problems with air links and, crucially, how they compare with Jersey, comes at a particularly bad time.’

Read his full statement here

Minutes and Technical Update

The June GIBA Council minutes are now online in the members’ section of our website. You can find them here.

BUSINESS NEWS

The States of Guernsey along with Jersey and the Isle of Man issued a joined statement announcing a series of steps moving towards publishing a public central register of beneficial ownership.

Read more

GFSC Guidance

The GFSC has published revised guidance on the way private trust companies are controlled and administered by licensed fiduciaries. Welcomed by Guernsey industry, it includes outcome-based moves revising requirements for directorships.

FBI Praises Island in Fight Against Financial Crime

The FBI has highlighted to American senators the ‘immense value’ of Guernsey’s information sharing in helping combat financial crime.

States of Guernsey Financial Stability Report

The report published by the States of Guernsey indicates Finance sector GVA growth was strong in 2017 and total employment in the sector grew by 1.5% over the year ending Dec 18.

GREEN FINANCE

Guernsey’s Progress Praised

The island’s progress in Green and Sustainable Finance has been praised by a leading international figure in the sector.

Stephen Nolan, Managing Director of the International Network of Financial Centres for Sustainability, a United Nations initiative, was in Guernsey last week and said,‘The Guernsey Green Finance initiative is an example of what’s possible when people come together around the table. It doesn’t matter what size the financial centre is, it’s assessing what it actually means to them in terms of risk and opportunity.’

Read more

FINANCE IN THE COMMUNITY

30/30 Challenge

This year’s 30/30 Challenge raised £75,000 for Les Bourgs Hospice, supported by Julius Baer Bank. The event, now in its 12th year, has in total raised £740,000 since its inception.

Teams Lap Up Hellvetia Challenge

More than 300 professionals took part in this year’s Hellvetia Challenge, raising money for the Guernsey & Alderney Youth Commission.

Participants were encouraged to complete between one and 10 laps, which included cycling up and down the Val des Terres and running from Havelet slipway to the aquarium, and back towards Castle Cornet before finishing back at the slipway. Teams could share each lap, or laps, in any way they chose.

Oak Group Supports Newly Refurbished Multidisciplinary Room at the PEH

The new fit-for-purpose Oak MDT room will provide an up-to-date space where various doctors and specialists can meet to discuss the essential management of cancer patients in the Bailiwick with medical specialists based in the UK.

Mark Chasey, Chairman of Oak, commented: ‘Oak is a long-time supporter of MUG. We originally got involved with the MDT project as sponsors of the MUG cycle rides that were held to raise the money. However, when we heard that the charity required additional funds to make this refurbishment happen, we didn’t think twice about providing the rest of the funds.’

Bermuda Shorts Week

8 – 12 July

Bermuda Shorts Week is back, supported by Butterfield and raising money for MUG.

Read more

JULY DIARY DATES

STEP & GAT Economic Substance

Economic Substance – what next? A practical guide for pragmatic Trustees.

Monday 8 July – OGH

12.00pm – 1.15pm

STEP and GAT are hosting a seminar looking at economic substance with Neil Hoolahan of Grant Thornton discussing substance from a Trustees’ perspective.

More information

Guernsey Chamber July Lunch

Are we there yet?

Monday 15 July – OGH

July’s Chamber Lunch considers the ‘big picture’ for Guernsey connectivity with Martyn Dorey. As the island potentially faces a perfect storm of a falling population, an ageing demographic and comparatively high travel costs, we will hear about the need to avoid the problems around those elements.

More information

Family Office Briefing

Thursday 11 July – London

4.00pm – 6.30pm

Learn why Guernsey has an illustrious pedigree in the provision of wealth management to high-net-worth clients and their families, based upon three pillars of stability, security and service.

More information

April Industry News Round-Up

From leadership changes at GIBA to cybersecurity under the spotlight, it’s been a busy month for Guernsey’s finance sector; here is our monthly newsletter with all of the top stories from the industry and our member organisations.
Don’t forget to follow @GIBAGuernsey on Twitter for updates and news throughout the month.

GIBA NEWS

GIBA Announces Leadership Changes

GIBA has appointed a new Chair and Deputy Chair; Tony Mancini takes up the position of Chair, while Paul Hodgson has been appointed as Deputy Chair.

Tony, a Tax Partner at accountancy firm KPMG, has previously sat on the GIBA Executive Committee as Deputy Chair. He has also served on the Guernsey International Fund Association (GIFA) Executive Committee and been a member of the Guernsey Society of Chartered and Certified Accountants (GSCCA) tax sub-committee.

Paul, Managing Director of Butterfield Trust (Guernsey) Limited, has also previously sat on the GIBA Executive Committee and is the current Chairman of the Guernsey Associations of Trustees (GAT). An experienced finance professional, Paul is also a Non-Executive Director of the Guernsey Training Agency (GTA) and was previously a non-States member of Guernsey’s Public Accounts Committee.

David Oxburgh now stands down after two years in the role of GIBA Chair and he will remain on the Council. GIBA would like to thank David for the tremendous work he has done for the finance industry during his time as Chair.

GIBA Issues Joint Statement on Runway Extension

GIBA, the IoD and Chamber of Commerce have issued a statement calling on the island’s Deputies to support a policy letter lodged by the Policy & Resources Committee authorising funding for a full cost-benefit analysis of the two runway extension options recommended in the PwC report on air and sea links.

Read the statement here

GIBA Discusses Why Collaboration is Key to Island’s Finance Industry Success

Guernsey’s finance industry is built on a bedrock of collaboration. The close working relationships between the various sector associations, industry bodies, the government and the regulator support the success of the many firms based in the island.

Read more in our article, which originally appeared in the Guernsey Chamber of Commerce’s Contact magazine.

Minutes and Technical Update

March GIBA Council minutes are now online in the members’ section of our website. You can find them here.
BUSINESS NEWS

Guernsey Introduces World’s First ILS Hybrid Vehicle

The world’s first hybrid vehicle for use in the insurance-linked securities (ILS) sector will lead to increased simplicity and efficiency for ILS fund managers, according to Carey Olsen Partner Christopher Anderson, who created the concept with the support of the GFSC.

The new launch means ILS managers will no longer have to ‘rent’ cells of protected cell or segregated account companies to act as Special Purpose Insurers (SPIs), which are often established in a different jurisdiction and operate entirely separately from the ILS manager’s fund.

GUERNSEY GREEN FUND

First London-listed Investment Company Gains Guernsey Green Fund Accreditation

In a landmark move, a first London-listed investment fund has successfully received Guernsey Green Fund accreditation.

Bluefield Solar Income Fund has invested in more than 80 UK-based solar assets, one of the largest diversified portfolios of solar assets in the UK, targeting long-life solar energy infrastructure expected to generate stable renewable energy output over a 25-year asset life.

Read more
CIISF Hosts Inaugural Guernsey Cyber Security Conference

The Channel Islands Information Security Forum (CIISF) held its inaugural Annual Guernsey Cyber Security Conference this month. A host of top cyber-security experts presented to local professionals from all business sectors.

Organiser Arthur Mainja, Cyber & Digital Advisory at KPMG, said: “It was great to see such a large turnout, which was a testament to the community’s interest in and regard for security. We believe the conference proved to be a valuable platform for education, awareness and collaboration for our security community in the Channel Islands.”

Butterfield Buys ABN AMRO

Butterfield Guernsey has announced it is buying the Channel Islands banking business branch of the Dutch-owned ABN AMRO, in a deal worth around £161million.

An agreement has been reached but the transaction should be finalised during the third quarter of 2019, when the ABN AMRO Channel Islands business and employees will all be integrated into the existing Butterfield Guernsey operations and operate under the Butterfield name.

Agilisys Announced as Preferred Bidder to Deliver Future Digital Services Programme

A two-year procurement process has reached a key milestone with Agilisys Limited, a leading UK-based technology and transformation company, being appointed as the preferred bidder for the digital transformation and future delivery of the States’ IT services.

As the proposed strategic partner for the States’ Future Digital Services Programme, Agilisys will help to deliver a dramatic improvement in technology, giving the community better and easier access to public services while enabling efficiencies and long-term cost savings. Furthermore, the partnership will see a significant investment in Guernsey’s digital economy.

FINANCE IN THE COMMUNITY

Chicken Run Takes Flight for PPBF

Running group distance.gg organised a new fun run for the Easter weekend. The Bedell Cristin Chicken Run was a 5km fun run open to athletes of all ages and abilities, beginning and ending at Pembroke.

Participants were given a chicken hat to wear during the run to celebrate the Easter weekend, with profits being donated to the Priaulx Premature Baby Foundation.

Saffery Champness Gives Helping Hand to Bright Beginnings Children’s Centre

A team of volunteers from Saffery Champness has revamped the baby and toddler gardens at Bright Beginnings Children’s Centre in preparation for the summer months.

The clear-up, organised by Audit Manager Lindsey Dean and Children’s Centre Manager at Bright Beginnings, Teresa Bott, saw a team of 10 volunteers from the audit and tax department with their family and friends assist with planting flowers and herbs, weeding, pruning, painting and giving the garden area a general tidy up.

30/30 Cycling Challenge is Back

The annual 30-day cycling challenge in aid of Les Bourgs Hospice is back, with a number of riders set to take to the roads over the coming weeks.

Organised by business partners Ian Brown and Paul Brehaut, the event has raised almost £700,000 for the charity-funded hospice over the last 12 years.
If you have a corporate team taking part, do tweet and tag @GIBAgsy so we can share your involvement.

MAY DIARY DATES

STEP Conference Early Bird Rates

STEP Guernsey Branch invites attendees to the annual STEP Conference at Beau Sejour on 20 June 2019.

STEP Guernsey’s flagship event, sponsored by Carey Olsen, allows delegates to meet, network and gain important knowledge and technical updates from outstanding speakers in the industry.

Book on or before 20 May 2019 to benefit from the following preferential early-bird rates:

STEP member = £160 (£190 from 21 May 2019)
Non-member = £190 (£225 from 21 May 2019)

More information

Guernsey Funds Forum

Thursday 16th May – London
12:00pm to 5:00pm

The 10th edition of the Guernsey Funds Forum, titled ‘Restart’, will explore the narrative for the future and how Guernsey can be the ideal location for investment funds in 2020 and beyond.

More information

The Guernsey International Business Association (GIBA) announces leadership changes

The Guernsey International Business Association (GIBA) has appointed a new Chair and Deputy Chair.

Tony Mancini, a Tax Partner at accountancy firm KPMG, takes up the position of Chair. Tony has previously sat on the GIBA Executive Committee as Deputy Chairman. He has also served on the Guernsey International Fund Association (GIFA) Executive Committee and been a member of the Guernsey Society of Chartered and Certified Accountants (GSCCA) tax sub-committee.

Tony has recently worked with the States of Guernsey on their work on the island tax regime in relation to the EU Code of Conduct Group’s economic substance requirements. Over the years he has assisted the States with the formulation of tax policy and administration in a number of areas. He is also a member of the British Venture Capital Association (BVCA) Tax Committee in the UK.

Paul Hodgson, the Managing Director of Butterfield Trust (Guernsey) Limited, takes up the position of Deputy Chair, having also previously sat on the GIBA Executive Committee. Paul is also the current Chairman of the Guernsey Associations of Trustees (GAT).

An experienced finance professional, Paul is also a Non-Executive Director of the Guernsey Training Agency (GTA) and was previously a Non-States Member of Guernsey’s Public Accounts Committee. He is a Chartered Accountant, Fellow of the Chartered Institute for Securities and Investment and a Member of STEP.

David Oxburgh now stands down after two years in the role of GIBA Chair and he will remain on the Council.

GIBA has a membership consisting of the associations representing all the major financial institutions and professional firms on the island and, as such, is the representative body of the financial services industry in Guernsey.

Tony Mancini says: ‘The financial services industry and the island currently face both challenges and opportunities. To meet these challenges and opportunities, it is vitally important for the different sectors and associations to work together and GIBA’s role in facilitating cooperation between the sector associations and presenting the industry view to the government is arguably more important than ever.

‘I am looking forward to supporting the industry in my new role, and on behalf of the GIBA Council, I would like to thank David Oxburgh for the tremendous work he has done in the last two years as our Chair.’

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