Update on the PYB/CYB tax changes
The PYB/CYB changes proposed by the Minister for Treasury & Resources were agreed by the States Assembly on 4 November 2020. It is important that tax agents familiarise themselves with the changes and are able to communicate the implications to their clients (particularly in relation to the November 2020 payments ordinarily due from a cohort of taxpayers).
In broad terms, those taxpayers who pay their tax by way of ITIS on a prior year basis will now have their 2020 ITIS payments offset against their 2020 tax liability (rather than their 2019 liability) and will continue on a “current year basis” of payment in the future.
Meanwhile taxpayers who pay their tax under the payments on account mechanism will have any tax payments made during 2020 offset against their 2020 tax liability (rather than their 2019 tax liability) and then from the 2021 year of assessment (“YOA”) they will broadly pay their tax in two payments (30 November in the YOA and 31 May after the YOA) with any sweep-up payment required in advance of the normal surcharge deadline. A separate set of rules apply regarding the payment of any outstanding liability due in respect of 2020 from these taxpayers.
By notice published in the JEP (on 10th and 12th November) the Comptroller of Revenue has confirmed that no taxpayer who pays their tax under the payments on account mechanism is obliged to make a payment in relation to their 2019 tax liability in November 2020. Furthermore this cohort are under no obligation to make a payment in November 2020 in respect of their 2020 tax liability. The next payment due from this cohort is in May 2021, in relation to their 2020 tax liability.
The 2019 tax liability for both of these cohorts (i.e. prior year ITIS payers and taxpayers who pay their tax under the payments on account mechanism) will be effectively “frozen”, to be paid at some later date. At the time of writing, the Regulations outlining how the “frozen” 2019 liability for these taxpayers is to be paid have not been released. However a Report presented to the States Assembly by the Minister (see: https://statesassembly.gov.je/assemblyreports/2020/r.122-2020%20proposals%20for%20the%20payment%20of%20the%202019%20tax%20liability%20of%20prior-year%20basis%20taxpayers%20%20[min.tr].pdf) indicated two options:
- Option 1: a structured payment plan of (up to) 20 years to 2042 (from 2022) with no obligation to start making payments until 2025
- Option 2: a deferred payment plan to settle the whole 2019 tax bill (e.g. via a pension plan or other financial product) by the applicable States Pension Age
The Report also indicates that consideration is being given to providing the Comptroller with greater flexibility to “smooth” ITIS rates where the act of moving on to a current year payment basis increases a taxpayer’s ITIS rate.
If any member has any queries regarding this matter please forward to [email protected].