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Changes to the record keeping requirements under the Income Tax Law

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Wednesday 20 June 2012

Until 2007, there was no provision of the Income Tax Law that specified what types of records should be kept for tax purposes, nor how long those records should be retained for.

The Income Tax (Keeping of Records, etc) Regulations, 2006 introduced specific record keeping requirements.

For people who received income from a business or income from the letting of property, the specified records had to be retained for a period of six years following the end of the year in which the relevant income tax return was submitted.

All other persons were simply required to retain whatever records they had used to complete their income tax return for a period of two years following the end of the year in which the return was submitted.

The Regulations did not extend to persons who did not complete a Guernsey income tax return.

The Treasury & Resources Department made further Regulations (The Income Tax (Keeping of Records, etc) (Amendment) Regulations, 2012) on 28 February 2012. These Regulations are being laid before the States on 27 June 2012 with the intention that they come into operation on 1 July 2012.

If the Regulations do come into operation as intended, they will create additional record keeping requirements from that date.

Firstly, the Regulations will now apply to all persons, whether or not they are required to make an income tax return.

The Regulations also set out specific requirements for persons who receive income other than from businesses or from the letting of property, for the first time.

The requirements are that:

The periods for which the documents referred to in the bullet point above have to be kept are:

In all of the cases above, the period for which records have to be retained runs from:

In addition, and for the first time, the 2012 Amendment Regulations also provide that where records or documents are retained outside Guernsey then the person required to keep and retain the documents must ensure that:

Anyone who fails to comply with this requirement may be subject to a penalty of up to £2,500.

There are two principal reasons why the requirements on keeping records have been revised:

Rob Gray, Director of Income Tax, said:

"At the Income Tax Office we are constantly looking at ways to improve the service that we give to the island's taxpayers and to reduce the burden of complying with income tax obligations. With reducing public service resources, one way to achieve this is to take away the need for persons with very straight forward income tax affairs to complete a tax return every year. If we do that, however, it is important that those persons must continue to keep records of their income, just in case it becomes necessary to raise enquiries at some point in the future. That is one reason why the Keeping of Records Regulations are being extended to cover all persons, whether or not they are required to send in a tax return. For the majority of people, such as employees, pensioners and those living on investment income, they are still only required to keep the records for a period of two years. It is only where income relates to a trust, a foundation or where the person concerned is a legal person (such as a company) that they will be required to keep records for six years.

We also live in an era when international finance centres, such as Guernsey, are often, very unfairly, criticised by other countries and international organisations. It is very important, therefore, to the continued well being of Guernsey's finance sector (and therefore Guernsey's economy) that we take all steps necessary to protect and enhance Guernsey's reputation as being a compliant and well regulated jurisdiction, by observing international standards in exchange of information for tax purposes. Guernsey performed extremely well in a very thorough review of its rules and procedures relating to, amongst other things, the need for persons in the island to keep records of financial transactions. Only some very minor deficiencies were found and these changes address those."

Issued by: R Gray, Director of Income Tax, Income Tax Office

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