Tax threat fails as deterrent to Jersey move

A ‘carrot and stick’ approach adopted by the Government on LLP reform has failed to deter Price Waterhouse and Ernst & Young from plans to register in Jersey.

President of the Board of Trade Ian Lang last week dangled the promise of a White Paper on LLP reform for consultation before Easter in front of the profession.

But the Inland Revenue warned that firms taking the Jersey option may be taxed as if they were companies. It refused to reveal its calculations, but partners could face additional National Insurance liabilities of 10.2% plus a host of other burdens.

Profession insiders believe the move is an attempt to ‘put the frighteners’ on firms considering offshore registration early next year.

PW operations director Michael Bishopp said the protracted Government reform timescale was off-putting. ‘We are discussing the tax situation with the Revenue,’ he said. ‘It hasn’t come to a conclusion. It will look at each case on its merits.’

E&Y’s senior partner Nick Land said his firm’s decision to go to Jersey was unchanged ‘given the timescale and the political uncertainty’ involved.

Lang’s announcement received a cautious welcome from the Big Six. Deloitte & Touche senior partner John Roques said conversion was a possibility if the ‘details’ were appropriate. KPMG will ‘wait and see’. Coopers & Lybrand and Arthur Andersen warmed to the plan, but said reform of joint and several liability was more pressing.

But David Furst, a partner at Clark Whitehill, which is planning legislation on the Isle of Man, said: ‘The Revenue hasn’t thought it through; there will be few takers for Jersey if it is the case.

‘The Government doesn’t like the idea of those two firms registering offshore because of the effect on the City’s reputation.’