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bigduckontax
bigduckontax, Accountant
Category: Tax
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Jersey company has a uk situated hotel. The jersey company

Customer Question

Jersey company has a uk situated hotel. The jersey company feeds off a trust. As there is a pe in the uk , there is ct due but the trusts solicitors are saying no ct is due as the company is resident and domiciled overseas. They are saying that the company and the hotel are effectively under uk radar , is this true? I am inclined to think that they are wrong ! If I am right, how do I go about informing the revenue to issue a tax return etc...please do give me specific manual and double tax treaty references that I can send to the solicitors ...thnx
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
Is the UK hotel owned directly by the Jersey company, or is it operated as a separate UK company owned by the jersey Company, although this is only semantics? Secondly the Inland Revenue was combined with HM Customs and Excise some years ago to become HMRC.
HMRC Guidance on the Double Taxation Treaty with the States of Jersey can be found at DT10750.
However, I have to concur with the Trust's solicitor's opinion. The use of companies in tax havens as a method of UK tax avoidance is commonplace, Jersey, Gibraltar, Turks and Caicos Islands are common locations. Although the antics of the like of Vodafone, Amazon and Starbucks have all received adverse exposure in the UK media of late their tax avoidance measures have been legal, although maybe not ethical, but tax law is not concerned with ethics!
The UK hotel's entire profit could be eliminated for tax purposes by a service charge from a tax haven company so any reference of its activities to HMRC would be an exercise in financial futility, unless UK revenue law is changed at some future date. In my view you are on a hiding to nothing even bothering to inquire of HMRC whether this matter is subject to UK taxation.
I am so sorry to have to rain on your parade.
Customer: replied 3 years ago.
Hi Keith , I have been categorically told that by the fact that the jersey company has a permanent uk establishment ie the hotel , corporation tax is due... Your answer is logical but doesn't agree with the HMRC guidance on corporation tax . I am going to need something concrete e.g case law ? From what you are saying , there is no need to prepare accounts or a tax computation for the hotel as far as the uk is concerned? I find this strange.
Expert:  bigduckontax replied 3 years ago.
Yes, but the Jersey company has merely. as I suggested, to raise a service charge against the hotel's trading account to extinguish any profit; currently a very common procedure as I explained. The hotel may indeed have to make a tax return and may be so doing, but if the Jersey company is operating in the way I have pointed out there will be nothing left to tax.
HMRC may well decide that making a return is merely another exercise in administrative futility and not require one to be made, though I think this possibility rather unlikely.
In the States of Jersey tax avoidance is big business and I am sure that you will find that the local solicitor there will be highly experienced in the matter.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.