States to close tax loophole in bid to raise funds

The States has confirmed it will close a tax loophole as part of plans to help tackle the government's £44m deficit.

Under the current law, people are able to create their own personal investment companies, lend them money, and then take it back as loan repayments without paying any tax.

Extra guidance has been added to the Statement of Practice M45 "Legal avoidance" to make it clear that if anyone uses this type of company to take money out as a loan repayment, it will be treated as a dividend, and taxed.

The Policy and Resources Committee also approved a proposal to amend the Income Tax (Guernsey) Law, 1978, so the change will be included in the island's 2026 budget.

Deputy Lyndon Trott, committee president, said: "When it comes to income tax, we have to ensure that everyone is paying their fair share, including businesses and individuals.

"But we are even more acutely aware of this at a time when we as a government have a £44 million deficit.

"This isn't the panacea for our financial woes, but we're taking action to close this loophole to make sure that we're collecting tax that belongs to the public purse."

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