Jersey Informs On Impact of UK Tax Treaty Changes

by Amanda Banks, Tax-News.com, London

07 December 2009

The Jersey authorities have released guidance for Jersey residents with UK pensions following the entry into force on November 27 of a bilateral Tax Information Exchange Agreement (TIEA) signed by the two governments in March 2009.

Alongside the signing of the TIEA, the two authorities agreed to amend the 1952 Arrangement between Jersey and the United Kingdom for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.

This incorporates a major change to the tax treatment of pensions, which means that Jersey residents will no longer be taxed by the UK tax authorities on certain pensions that they receive from the United Kingdom.

The Island's Comptroller of Income Tax, Malcolm Campbell, commented that:

“Following the enactment in the UK of the Double Taxation Relief on International Tax Enforcement (Jersey) Order 2009, Jersey residents in receipt of a UK pension may apply to the UK Tax Authority, HM Revenue and Customs (HMRC), to have, with effect from the April 6, 2010, their UK pension paid to them without the deduction of UK tax”.

“This Arrangement could mean significant savings in terms of tax paid for some Jersey residents, who could have been paying 40% tax to HMRC on their pension and who may in future be subject to tax at 50%. The Arrangement means that, subject to a claim being made and accepted by HMRC, Jersey residents will only be paying tax in Jersey, at a maximum rate of 20%, on their UK pension.”

The Arrangement also affects residents of the United Kingdom who have been paying Jersey tax on their Jersey pensions.

Under the new regime, UK residents will be able to apply to the Comptroller to stop Jersey tax being deducted from their Jersey pensions, meaning that they will only pay tax in the United Kingdom.

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