Transactions under Article 134A of the Income Tax Law

1240/5(2165)

WRITTEN QUESTION TO THE PRESIDENT OF THE FINANCE AND ECONOMICS COMMITTEE BY DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY 28th SEPTEMBER 2004

Question

Further to questions asked on 11th May 2004, regarding the ability of the Comptroller of Income Tax to rule on cases of tax avoidance under Article 134A of the Income Tax Law for the full year to April 2004, would the President inform members –

1. w h at types oftransactionwere wholly or partly counteractedunder the Article?
2. if a ll the transactions had been wholly counteracted, howmuch extra tax would have been collected, and how much extra tax wasactually collected?
3. w h y the distinction ismade between total valueand profits?
4. w h at proportion, if any, involved roll-upfundsor similar revenue-to-capital transfers?
5. w h at proportion of these transactions and oftheir value involved financial service companies, private individuals and single director/shareholder companies? and,
6. w h at factors distinguishthosewhich were counteracted from those allowed? Answer

1. A l l the transactions, apart from one relating to a potential chargeonproperty development, related to taxpayers either attempting to switchoutofincomeproducing assets such as bank accounts,the interest on whichistaxed, into roll-up fundsor similar structures or, to taxpayerswhohadacquired a capital sum, for example, from an inheritance, a propertysale, a matured life assurance policy or a lump sum paid upon retirement, and which the taxpayer wanted to place wholly or partly into a roll-up fund or similar structure.
2. T h e totaltax that would have been collected if all the transactions had been whollycounteracted is estimated atsome £300,000 and the extra tax collected due to the transactions being counteracted is estimated atsome £140,000. The one transaction involving a potential chargeonpropertydevelopmentis currently underappealandhas not been settled. The tax charged in that caseis currently £1 million.
3. V a lueisusedwhen assessing thetotal monetary amounttobeswitched from anincomeproducingsource into roll-up fundsor similar instruments and profit is used when it is a trading transaction.
4. A l l the transactions, apart from theone relating to a potential chargeonproperty development, related to switches from incomeorpotentialincomeproducingassetstoroll-upfundsor similar instruments.
5. A  ll were private individuals. None were financial service companies. No records  were kept of the particular status of the private individuals involved and it would entail a greatdealoftimeand effort togo through all these files again to answer this question at what is a particularly busy time for theIncomeTax Office.
6. E a chcase is lookedatindividually as to the sizeofthe transaction and the value of thetransaction as compared to the individual'sotherincome bearing capital worthand a judgementmadeaccordingly as to whether ornottocounteractunder Article 134A.