This Is Guernsey

TREASURY AND RESOURCES minister Lyndon Trott has welcomed Chancellor Alastair Darling’s expectation that any economic slowdown will be only temporary. Mr Darling announced in his first pre-Budget report on Tuesday that turbulence in global credit markets would have an impact in Britain.

He indicated that the economy would grow more slowly next year than in 2007, with a 2-2.5% forecast reduced from earlier in the year, but he has left the forecast unchanged for 2009 at 2.5-3%. Growth rates for the financial services sector in the UK topped 10% earlier this year.

‘He is basically saying that he expects the UK to expand by 3% this year, with a slight fall next year and strong and positive growth for the year after and the year after that,’ said Deputy Trott.

‘The outlook for UK growth according to other forecasts remains positive. The outlook for global growth appears softer, but remains positive.’

Economic growth in the UK remains respectable, some way above the long-term trend, and much higher than most other advanced economies.

Sustained low inflation there - Mr Darling has indicated that the government will meet its year-end target of 2% - was also a good sign, said Deputy Trott.

‘The UK Treasury view is that the inflation outlook for the UK is benign and I would anticipate that the inflation outlook for Guernsey is similarly benign.’

Guernsey International Funds Association executive committee member Tony Mancini said one of Mr Darling’s more interesting announcements on residence could have a major impact on some Guernsey financial workers’ travel arrangements.

Until now only full days spent in the UK were counted as days of residence, but the proposals mean that a two-night stay in the UK will in future be classed as three days rather than one.

To become UK tax-resident, people have to spend an average of 90 days a year there during a four-year period.

‘People will need to think about their travel arrangements to take account of the significantly reduced number of days they can spend in the UK, or they could be classed as UK tax-resident and pay 40% of all their income.’

Mr Mancini said people in the private client business would also be relieved to hear that Mr Darling would not be abolishing the non-domiciled status.

Deputy Trott anticipated good news for the financial services industry in the island as a result of some of Mr Darling’s moves.

He agreed with Alchemy Partners boss Jon Moulton, who spoke at a special business lunch at Moore’s Hotel on Tuesday, that Guernsey could become a popular location for private equity entrepreneurs.

Mr Darling has ‘cracked down’ on such people working in the UK but paying little tax. He has scrapped the 10% that some pay and introduced an 18% flat rate of capital gains tax.

Guernsey’s new system of tax on distribution of profits would see private equity principals taxed at 20% when they took profits out of the business. In the UK, they would pay 18% irrespective of what they were doing with the money.

Deputy Trott also welcomed Mr Moulton’s positive comments about Guernsey as a place to do business. The island’s tax and regulatory system made it attractive for private equity funds, said Mr Moulton.

Article posted on 12th October, 2007 - 12.00am