Enveloped Property Transactions Tax

The Minister for Treasury and Resource lodged the Draft Taxation (Enveloped Property Transactions) (Jersey) Law 202- [P.119/2021] (the Draft Law) on 21 December 2021 for debate by the Assembly on 8 February 2022. 

If adopted the Draft Law will introduce an Enveloped Property Transactions Tax to relevant transactions where:

• The entity, or any entity over which it has control, is the beneficial owner of the enveloped property; and

• The transferor (owner) of the entity transfers to a person (the transferee) a "significant interest" in the entity.

A "significant interest" is defined as more than 50% of the interest in the entity. For example, a company transfers a significant interest if it transfers more than 50% of its shares. Schedule 1 of the Draft Law stipulates specific exemptions from Enveloped Property Transactions Tax, this schedule will be able to be amended by regulation. Exemptions include:

• Devolution of an estate (essentially the winding-up of an estate);

• Any transactions that take place by order of the court, such as during divorce proceedings;

• The transferee is a tax exempt charity;

• The transferee is a tax exempt Social Housing Company;

• The transferee is a Minister, or one of the Parishes; and

• Transactions where the beneficial owner of the property remains the same

Enveloped Property Transaction Tax will be imposed where the land has a market value exceeding £700,000 for commercial properties and £500,000 for residential properties. This will be calculated using market value bands, mirroring those used for Stamp Duty and Land Transaction Tax (LTT).

P.119/2021 will also amend the LTT Law (Taxation (Land Transactions) (Jersey) Law 2009) expanding the scope to include relevant transactions of commercial properties by share transfer. Further amendments are proposed to the Companies (Jersey) Law 1991 to require receipt relating to relevant transactions to be provided in line with the Draft Law and the Revenue Administration (Jersey) Law 2019 which are consequential on the new provision of EPTT.Minister subsequently presented an Acte Opératoire (P.119/2021 Add.(2)) to enable the new tax to be charged immediately should the Assembly adopt the Draft Law. 

The Minister subsequently presented an Acte Opératoire (P.119/2021 Add.(2)) to enable the new tax to be charged immediately should the Assembly adopt the Draft Law. 

An Addendum with economic impact analysis of Enveloped Property Transactions Tax was presented by the Minister on 21st  January 2022 , this was subsequently reissued (P.119 Add. (re-issue)) to include further supporting information followimg questioning by the Panel. 

The Minister for Treasury and Resources subsequently lodged a third Amendment (P.119/2021 Amd (3)) on 1st  February 2022 which if adopted will bring the Law into force on 4th April 2022 to enable certain large commercial property transactions to be finalised which had not been able to consider the Draft Law as proposed. 

On 3rd February 2022 the Minister for Treasury and Resources presented the Draft Order [Draft Taxation (Enveloped Property Transactions) (Statements) (Jersey) Law 202-] as a third Addendum (P.119 Add. (3)) to the Draft Law to set out the information that would be required to be sent to the Comptroller following a relevant transaction. Due to the late lodging of the third Addendum, by the Minister, this Addendum was not been subject to scrutiny by the Panel.

The Corporate Services Scrutiny Panel launched a Review of the Draft Law on 6th January 2021. The Panel received a number of written submissions, from key stakeholders, expressing concern on elements of the Draft Law, as such the Panel lodged two Amendments to P.119/2021: The Amendments (P.119/2021 Amd./P.119/2021 Amd.(2)) sort to remove the amendment to the Companies Law which would have disabled the registering of an instrument of transfer of shares for relevant companies until evidence of a receipt of Enveloped Property Transactions Tax and remove property used for non-domestic purposes (commercial properties) from the scope of EPTT.

The Panel held a Public Hearing with the Minister for Treasury and Resources and Government Officers on the 27th January 2022. The Panel lodged its Comments [P.119/Com] to inform the Assembly debate on the 3rd February 2022.  The Panel concluded that, whilst the introduction of Enveloped Property Transaction Tax was a complicated and somewhat controversial piece of legislation, the principal of the proposed introduction of the new tax was based upon the intended goal of ensuring broadly equivalent treatment across similar types of transactions involving land in Jersey.  

The Panel were of the opinion that the introduction of new taxation should always receive ample consideration. Although the Minister had advised the Panel that the introduction of Enveloped Property Transaction Tax was simply a method of closing the gap of paying Stamp Duty or Land Transition Tax (LTT) as an individual or company, it did introduce a new charge for those purchasing companies.

The Panel deduced from the content of the written submissions received and Amendments required that the Minister should have provided comprehensive detail and engaged further with key stakeholders on the Draft Law, prior to the Proposition being lodged.

The Panel concluded that questions remained regarding the practical and economic impact of the Draft Law on this segment of the economy and that the timetable that the Minster adopted for the preparation and release of the economic impact analysis had restricted the ability. of the Minister, to address concerns regarding the economic consequences of adopting the Draft Law prior to the Assembly debate.

The Panel also decided to withdraw its second Amendment as the primary concern which prompted the Panel to lodge the Amendment related to the Minister’s perception of what constituted tax avoidance, a key argument for the introduction of Enveloped Property Transactions Tax, and the Draft Law’s inadvertent impact upon transactions that are genuine in nature. As the Panel highlighted in its Amendment, the Minister had not provided enough evidence of the necessity of the Draft Law at the point of lodging. The Comptroller of Revenue had since highlighted that it would not be right to characterise enveloping properties for that reason and that Enveloped Property Transactions Tax was not merely an anti-avoidance measure, instead it addressed an identified inequality in the tax system. 

The Panel were minded to support the Draft Law should its First Amendment and the Third Amendment lodged by the Minister be adopted by the Assembly, however it remains conscious that the draft tax was complex and controversial in part.  

1. To undertake scrutiny of the proposition P.119/2021 - Draft Taxation (Enveloped Property Transactions) (Jersey) Law 202-;

2. To explore the economic impact of the Enveloped Property Transactions Tax;

3. To examine the powers afforded to the Minister for Treasury and Resources and Comptroller of Revenue by P.119/2021;

4. To ascertain the impact of the implementation of the Enveloped Property Transactions Tax on the resources of Revenue Jersey;

5. To appraise the fairness of the ability to appeal; and,

6. To deliver a comments paper to the States Assembly.