Income Tax (Amendment No. 35) (Jersey) Law 201-. Lodge for debate

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A decision made 25 May 2010 regarding: Income Tax (Amendment No. 35) (Jersey) Law 201-. Lodge for debate.

Decision Reference: MD-TR-2010-0077
Decision Summary Title:	Income Tax (Amendment No 35) (Jersey) Law 201-		Date of Decision Summary:	25 May 2010
Decision Summary Author:	Director, Finance Industry Development		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Income Tax (Amendment No 35) (Jersey) Law 201-		Date of Written Report:	25 May 2010
Written Report Author:	Director, Finance Industry Development		Written Report : Public or Exempt?	Public
Subject: Lodge au Greffe Income Tax (Amendment No 35) (Jersey) Law 201-.
Decision(s): The Minister approved the Income Tax (Amendment No. 35) (Jersey) Law and accompanying report for lodging ‘au Greffe’ with a request for debate as soon as possible.
Reason(s) for Decision: The Amendment is consequential on the Incorporated Limited Partnerships (Jersey) Law 201- (‘the ILP Law’) and the Separate Limited Partnerships (Jersey) Law 201- (‘the SLP Law’). These two laws are each closely modelled on the existing Limited Partnerships (Jersey) Law 1994 and seek to build on the success of that law by allowing limited partnerships with legal personality separate from that of their partners. The ILP Law will allow incorporated limited partnerships, i.e. being a body corporate and having perpetual succession. The SLP Law will allow limited partnerships having separate legal personality, but without being a body corporate. The Amendment provides for separate limited partnerships and incorporated limited partnerships to have the same income tax treatment under the Income Tax (Jersey) Law as for existing limited partnerships.
Resource Implications: Since the treatment of separate limited partnerships and incorporated limited partnerships will be the same as for existing limited partnerships, there will be no additional resource implications arising from the administration of the Amendment. Overall, the effect of the ILP Law, the SLP Law and the Amendment will be revenue positive, through the levying of fees and taxes.
Action required: Forward the Income Tax (Amendment No. 35) (Jersey) Law and accompanying reports to the Greffier of the States and request that the projet be lodged ‘au Greffe’ for consideration by the States as soon as possible.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision (If different from Date Signed):

Income Tax (Amendment No. 35) (Jersey) Law 201-. Lodge for debate

Treasury and Resources

Ministerial Decision Report

INCOME TAX (JERSEY) (AMENDMENT NO 35) LAW 201- (“THE AMENDMENT”)

1 THE ISSUE AND RECOMMENDATION

1.1 It is recommended that the Treasury Minister (“the Minister”) should approve the Amendment and the attached report and sign the declaration of compatibility with the European Convention on Human Rights and the Decision Summary and that the documents should be lodged au Greffe so as to allow the Amendment to be debated by the States within the next 3 months.

2 BACKGROUND

2.1 The Amendment is consequential on the Incorporated Limited Partnerships (Jersey) Law 201- (“the ILP Law”) and the Separate Limited Partnerships (Jersey) Law 201- (“the SLP Law”), which it is intended will be debated by the States shortly.

2.2 Since the passing of the Limited Partnerships (Jersey) Law 1994 (“the 1994 Law”), Jersey limited partnerships have proved increasingly popular, particularly as collective investment vehicles, and particularly among private equity investors. The 1994 Law is widely considered to be both modern and clearly drafted. We seek to build on that success with the introduction of two further limited partnership laws, introducing different possible legal statuses for limited partnerships.

2.3 A limited partnership is a form of partnership having both general and limited partners. The key feature is that the limited partners’ liability is limited to their partnership contribution, while the general partners’ liability is unlimited. In order to benefit from this limited liability, the limited partners must not involve themselves in the management of the limited partnership.

2.4 At present a Jersey limited partnership does not have a legal personality of its own. In some circumstances this can pose a problem for investors, e.g. if investing in another jurisdiction which does not recognise the concept of limited partnerships. In Scotland limited partnerships do have legal personality, while in Guernsey limited partnerships have a choice as to whether to adopt legal personality or not. It is believed that a wider range of uses of Jersey limited partnerships would be made by consumers if they had the option of creating a limited partnership with legal personality.

2.5 Following initial consultation on this topic, there was widespread support for the introduction of Jersey limited partnerships having legal personality. However, it was apparent from the consultation that there would be difficulties in following the Guernsey route of allowing a choice within the existing law, since it was considered that this route might have an adverse effect on existing Jersey limited partnerships formed upon the basis of advice given under the 1994 Law.

2.6 Two possible models were identified: the Scottish model, where partnerships (including limited partnerships) have legal personality separate from the partners, but without being a body corporate, or an incorporated model, where a limited partnership would be a body corporate, having perpetual succession in addition to separate legal personality and being somewhat more similar to a company. Following discussions with industry representatives and, through them, with key intermediaries, a demand for both models was identified.

2.7 We are therefore bringing forward two new free-standing draft laws, the ILP Law and the SLP Law, each modelled closely on the 1994 Law, but each providing for a limited partnership with a different legal status. These provide respectively for the establishment of Incorporated Limited Partnerships (“ILPs”) and Separate Limited Partnerships (“SLPs”). The SLP will have legal personality but without being a body corporate (as is already the case for a Scottish limited partnership), whereas the ILP will be a body corporate.

3 THE AMENDMENT

3.1 These laws have been developed working closely with the Jersey finance industry, and have received widespread support. The Jersey Financial Services Commission have approved the legislation from a regulatory view-point.

3.2 The Amendment adds two new articles to the Income Tax (Jersey) Law 1961, numbered 76B and 76C, dealing with the taxation of ILPs and SLPs respectively. In each case the taxation treatment mirrors that of existing limited partnerships under Article 76A.

4 HUMAN RIGHTS IMPLICATIONS

4.1 The Law Officers’ Department have stated that in their opinion the Amendment is human rights compliant.

5 RECOMMENDATION

5.1 It is recommended that the Minister should approve the Amendment and the attached report and sign the declaration of compatibility with the European Convention on Human Rights and the Decision Summary and that the documents should be lodged au Greffe so as to allow the Amendment to be debated by the States

6 RESOURCE IMPLICATIONS

6.1 Since the treatment of separate limited partnerships and incorporated limited partnerships will be the same as for existing limited partnerships, there will be no additional resource implications arising from the administration of the Amendment. Overall, the effect of the ILP Law, the SLP Law and the Amendment will be revenue positive, through the levying of fees and taxes.