Jersey calling

Changes to the UK corporate tax regime have prompted some businesses to set
up shop in Jersey. By Mike Jeffrey

Jersey calling It has been widely reported in the UK press that a number of UK ­corporates with significant non-UK business interests are considering migrating for tax purposes to ­Ireland or other lower taxation jurisdictions in an effort to combat what they perceive to be an increasingly uncompetitive UK ­corporate tax regime.

A recent YouGov poll reported that one in three UK companies are considering such a move, with some 38 per cent of executives polled at medium and large companies in the UK stating that they had discussed ­moving operations offshore to reduce ­corporation tax.

One specific issue that has prompted UK corporates to consider migrating was the consultation launched by the Treasury and HM Revenue and Customs in June 2007, proposing changes to the way in which the ­foreign profits of UK corporates are taxed.

While the stated intention was that the changes were “revenue neutral”, there was a concern in some quarters that the changes could bring significant amounts of foreign income into the UK tax net.

A number of company migrations have ­recently been announced, including Shire, United Business Media and Henderson. The latter migration received particular interest in the press as it was the first ­financial services business to announce such a move.

Henderson, like Shire and United ­Business Media, are seeking to migrate to Ireland and have selected Jersey as the place of incorporation of their new holding ­company. Pursuant to a UK scheme of arrangement and associated reduction of capital, the shareholders of the existing UK ­incorporated holding company receive shares in the new Jersey holding company, the shares of which are then admitted to ­listing on the London Stock Exchange.

Such transactions are regarded as a great opportunity for the island. These very large corporates have decided that Jersey offers them the corporate law flexibility and reputational integrity that they require and their investors expect. This, in addition to being a vote of confidence in Jersey, ­represents a new stream of business as these businesses go on to expand, raise capital and acquire other businesses.

Mike Jeffrey is a partner at Carey Olsen

Jersey: what’s the attraction?

Tax neutrality:
Following the introduction of the “zero/10” tax regime in ­Jersey (which replaced the ­previous “exempt company” regime), the ­corporate tax rate for almost all types of ­businesses will be nil. In ­addition, no stamp duty is payable in Jersey on issues or transfers of shares.

Geographic proximity:
Jersey is geographically close to the UK and there are regular flights between Jersey and many UK airports.

Corporate law flexibility:
Jersey’s corporate law is ­modelled on English law and accordingly UK corporates and their advisers can readily understand the implications of using a Jersey company. In addition, Jersey corporate law incorporates a number of innovations which provide greater flexibility to ­corporates, including no ­financial assistance regime for public companies and very flexible distribution rules.

Code application:
As a company listed on the main board of the London Stock Exchange, the City Code on Takeovers and Mergers will still apply to the group notwithstanding the introduction of a Jersey holding company.

Jersey has uncertificated ­securities regulations which enable the electronic trading of shares of a Jersey company through CREST. Accordingly, it is not necessary to set up depositary type arrangements as it is in some other offshore jurisdictions. However, if ADI or other such interests exist, these can be replicated by the Jersey company.

Treasury shares:
Jersey corporate law permits a company to hold its own shares in ­treasury. There is no ­restriction on the amount of shares which can be held in treasury (unless the articles of association contain a ­restriction).

Takeover-related provisions:
Jersey corporate law contains scheme of arrangement ­provisions as well as ‘squeeze out’ provisions that are­ ­essentially identical to their UK equivalents. Accordingly, investors can be comfortable that the same takeover ­related provisions they are used to having under English law will ­continue to apply ­notwithstanding the ­introduction of a Jersey ­holding company.