En Voyage - Issue #8

Business
DOCUMENT DUTY
UPDATE – WHAT
DOES IT ALL MEAN?
ON 15 NOVEMBER 2017, NEW LAWS DEALING WITH DOCUMENT (STAMP) DUTY
CAME INTO FORCE – BUT WHAT HAVE THE STATES OF GUERNSEY ACTUALLY
CHANGED? HOW IS THE NEW LAW DIFFERENT TO WHAT WE HAD BEFORE?
COLLAS CRILL PROPERTY PARTNER PAUL NETTLESHIP EXPLAINS
RECAP – WHY NEW LAWS?
The reasons for the new laws were twofold.
Firstly the States wanted to "close the loophole"
of share transfers.
Under the old regime duty was not payable on the
transfer of shares. So if a house was owned by a
company instead of individuals (with those individuals
owning that company) a purchaser could buy
the shares in that company instead of buying the
property, and save considerable sums in duty.
Now, duty will be payable on such a transfer
of shares.
The second reason was to set out the various
offences of avoiding the payment of document
duty and putting it all on a statutory footing.
It also introduces an appeals process against
decisions of H M Greffier.
Neither law has changed the rates of duty
payable, which was done at the start of the year.
THE NEW LAWS
The laws in question are called the Document
Duty (Anti-Avoidance) (Guernsey) Law, 2017 and
the Document Duty (Guernsey) Law, 2017.
Both laws actually repeat many of the
same provisions and could probably have
been incorporated into one law.
THE NUTS AND BOLTS
As expected, these laws passed through the
States without opposition and so the proposed
framework is now in place.
Parties to a transaction must make certain
declarations (e.g. that the value disclosed is the actual
value being paid) which, in the case of a conveyance,
will be in the document itself.
The Greffier may require additional information or
refer the matter to the Director of Income Tax, who
may make his own formal assessment and has
powers to impose penalties or give directions to make
adjustments if he deems the transaction's purpose
to be to avoid tax liability. A right of appeal to the
Royal Court is available against such decisions.
However, we expect this to be a rare occurrence,
as most transactions are arm's length and/or the
value clear.
EXCHANGES
Under the old law, a saving was to be made for
two parties "swapping" their properties. This has
now gone. However, because transactions of
this sort were so infrequent, the change
will not have a significant impact.
EXEMPT TRANSACTIONS
This is a change from the previous regime.
Historically, there appeared to be a misapprehension
that "family transactions" (e.g. parents to children)
were exempt from document duty. However, this
was not the case.
Duty was always payable in full on the consideration
paid. However, it just so happened that for many of
these types of transactions the consideration was £1,
and therefore the duty was only two pence.
The new laws have made family transactions
(amongst others) exempt from duty.
The definition of "family member" is very wide
and incudes:
• Current or former spouses or civil partners
or co-habitants
• Parents, stepparents, children, stepchildren,
grandparents, grandchildren, great-grandparents,
great-grandchildren, siblings, uncles, aunts,
nephews and nieces of a person or a person's
spouse, civil partner or co-habitant
It also includes people who have a bona fide
intention of becoming a spouse or civil partner –
so presumably also covers engaged couples.
Under the new regime an individual can buy
from or sell to any of their relations that fall into
the statutory categories, summarised above,
for full value, and not incur duty.
By introducing these laws the States have sent
out a clear message: be nice to your family.
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