There is little argument that 2020 is a year like no-other and with the upheaval and uncertainty created by Covid-19 it is understandable that corporate tax filings in the Channel Islands are unlikely to have been at the top of most people’s priority lists. However it is safe to say that from a corporate tax filing perspective, 2020 is a standout year in the Channel Islands; with both Islands requiring the submission of new format tax returns, which ask for more information and documentation than ever before.
Although Guernsey have recently announced that the filing deadline for 2019 tax returns has been extended to 28 February 2021, experience shows that the filing deadlines in both Islands (Jersey: 31 December 2020; Guernsey: now 28 February 2021) will be here before we know it – particularly when you start factoring in the other deadlines that occur around the year end. #timeisticking and hence it is now time to engage with the process of completing corporate tax returns to avoid an end of year rush and reduce the risk of being exposed to the financial penalties that arise from late submission and/or the inclusion of errors in submitted tax returns.
To help your thinking, the major differences between the tax filing process this year (compared to last year) are:
1. Every company will need to complete and submit its own tax return to the Revenue Authorities – the bulk return processes in both Islands (which facilitated the submission of a large number of returns by way of a single document) are now a thing of the past. Therefore if your organisation administers 200 companies, you will need to ensure that 200 separate tax returns are submitted by the filing deadline.
2. With both Islands only accepting online filing – all companies will need to ensure that they are individually registered with the Revenue Authorities and have been issued with the requisite registration numbers, so that they can gain access to the online portal and file their returns.
3. The submission of financial statements is now a mandatory part of the corporate tax return process in both Islands. Arguably the bar is higher in Guernsey, as the financial statements submitted need to be certified by (broadly) a qualified accountant.
4. As the 2019 tax return is the first return relating to a period in which the economic substance rules apply, companies will have to determine whether they are in-scope of those rules and, where they are, provide a significant amount of information regarding the application of the three elements of the economic substance test (1. Directed and Managed; 2. CIGA; 3. Adequate People, Premises and Expenditure) in the context of the company.
5. For all companies (including those outside scope of the economic substance rules) the returns require more disclosures than ever before – the days of “two-tick, global returns” are gone. To provide an indication of how much more involved the returns have become, our internal checklist for a “simple” 0% 2019 Jersey tax return contains c.25 points which need be cleared before it is considered ready for submission.
Each of these differences places demands on an organisation’s time/resources and moves corporate tax returns up the risk register. Particularly for those organisations with a material number of corporate tax returns to complete and submit, detailed plans to meet these statutory obligations must be devised and then executed within short order.
The team at KPMG in the Channel Islands is here to help you meet your statutory tax obligations – from helping your organisation to develop a plan of action between now and the filing deadline, all the way through to acting as your registered tax agent preparing your returns ready for submission, we can deliver a solution which meets your needs, reducing the demand on your internal resources and managing your risk exposure. If you would like to discuss further, please contact your usual contact within KPMG in the Channel Islands or Paul Eastwood.