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Investment Fund Management in JerseyDocument Transcript
Investment Fund Management in
Introduction whilst remaining less than a one hour flight from London
and close to Europe’s other financial centres.
The UK investment manager exemption currently enables Furthermore, the Island’s attractive environment, modern
certain non-UK residents (including offshore investment infrastructure and high standard of living ensure that it
funds such as hedge funds and private equity funds) to has more than only financial advantages.
appoint UK-based investment managers without
rendering the fund UK resident or liable to UK tax. For many years, businesses have established operations
in Jersey to take advantage of a beneficial tax regime, but
However, the eligibility conditions for the UK investment the ability to establish a real presence in the Island has
historically been limited to local residents or multinational
manager exemption are currently expected to be
reviewed by HMRC which may impact adversely on financial institutions. However, in response to a desire to
investment management activities carried out from diversify Jersey’s economy and encourage high value,
London at present. In addition, uncertainty over the low impact business to the Island, such as investment
potential impact of the EU’s alternative investment fund fund management, the local Jersey authorities have
manager’s directive, together with certain changes to the made it easier for certain businesses to establish a
tax treatment of carried interest payable to investment presence and for individuals to become resident in the
managers on the performance of private equity funds Island.
which are likely to result in the withdrawal or restriction of
taper relief, which may make the UK a less attractive Corporate Taxes
location for managers of private equity funds.
With the introduction of the “zero-ten” tax regime in
Investment management operators in the UK are liable to Jersey, the profits of a Jersey based business involved in
UK tax both at entity level on investment management the provision of investment management services to
fees and at an individual level in the form of income tax of investment funds may be taxed at a rate of 0%, provided
the investment management personnel and, possibly the investment manager is regulated for the conduct of
also, capital gains tax. fund services business as an investment manager.
Recent changes to Jersey’s tax regime mean that Employee Incentives
investment management vehicles can now be structured
to pay Jersey tax at a rate of 0% and this change, A key advantage of operating offshore is that offshore
combined with developments in Jersey’s regulatory based investment fund managers are able to incentivise
policy, makes the Island an ideal location for investment and return key local and onshore employees using
managers considering establishing offshore operations or offshore employee benefit trusts or international pension
even relocating from the UK. structures. These methods of providing employee
benefits to staff are often easier to implement in an
If appropriately structured, the investment management offshore environment if the complex employment and tax
structure and, if also based offshore, the individuals legislation of jurisdictions such as the UK is not
performing the investment management function, are applicable.
likely to achieve a significantly reduced tax burden than if
located onshore. As a result of recent changes in Jersey’s
tax regime, a Jersey based entity which is regulated for
the conduct of fund services business as an investment
Jersey has long been admired for its simple tax regime.
manager will be able to reduce its tax liability to 0%. In
There are neither wealth taxes nor capital gains tax or
addition, given many investment funds have to date been
inheritance tax and Jersey residents are subject to
established offshore, establishing investment
personal income tax at a maximum rate of only 20% on
management operations offshore may improve the tax
worldwide income. Certain individuals involved in the
analysis in relation to the tax residence of the fund itself.
management of investment funds who become resident in
Jersey may (subject to a number of conditions) seek to
The Island’s well established and stable political
have a significant proportion of their non-Jersey income
environment combined with high regulatory standards in
taxed at a rate as low as 1%.
the finance industry provide investment managers with
the advantages of a well-regulated offshore jurisdiction
Investment Fund Management in Jersey
Becoming Resident in Jersey building, due for delivery in 2010, will have over 100,000
square feet of office accommodation and space has been
Many investment managers are able to establish reserved for clients requiring serviced offices. The new
operations in Jersey without physically relocating staff in office is located on The Esplanade, which has a high
the Island. Where an investment manager is structured concentration of financial services businesses and
without a physical presence in Jersey, many of the service providers. Ogier can arrange long and short-term
regulatory requirements applicable to such an operation occupation licences on a fully furnished basis.
are able to be met by a regulated administrator such as
Ogier Fund Administration (Jersey) Limited. Jersey Expert Fund Regime
However, we also see a trend for some or all of the Many investment fund arrangers have taken advantage of
principals involved in providing investment management Jersey’s Expert Fund regime since its inception in 2004.
to consider a move offshore. Expert Funds, which are subject to a light degree of
regulation, have proved to be popular and suitable
Jersey residents enjoy a high standard of living and good vehicles for many types of investment funds, including
accommodation in the Island is much sought after. The hedge funds and private equity funds. Expert funds are nil
availability of housing stock to new residents is limited to rated for tax in Jersey.
those individuals whose residence in the Island is a result
of their being ‘essentially employed’ or where their To conduct investment business in relation to an expert
residency ‘can be justified on social or economic fund, and to avail itself of the 0% tax, a Jersey resident
grounds’. It is by satisfying this latter category that high investment fund manager will need to be registered under
net worth individuals such as investment fund managers the Financial Services (Jersey) Law 1998 for the conduct
are able to become resident in Jersey. of fund services business as an investment manager. The
investment fund manager will need to satisfy the Jersey
For an investment fund manager to be granted a Regulator as to span of control issues and may be
permanent licence to reside in Jersey, the authorities will subject to annual inspections.
consider the individual’s business and social background,
number of their dependants as well as any non-economic The regulation of an investment fund manager in Jersey
benefits that Jersey may obtain if residency is granted. is not particularly onerous and the compliance
requirements will be far less demanding in terms of
The individual’s likely tax contribution is a key factor. To management time and expense than the equivalent
meet current requirements for residency, an individual regulatory requirements of the United Kingdom, Europe
whose residence in the Island can be justified on social or or the United States. The Jersey Regulator has
economic grounds would normally be expected to make expressed its desire to be flexible in relation to the
an annual tax contribution of £100,000. This represents a regulation of fund managers establishing a business in
reduction on previous requirements. the Island specifically to encourage the investment fund
industry to use Jersey.
Individual employees whose residence in the Island is as
a result of them being “essentially employed” do not have Jersey Eligible Investor Fund Regime
to satisfy a minimum income tax contribution. The factors
taken into account in assessing whether to grant Jersey has recently developed an eligible investor fund
“essentially employed” status include the expected regime for eligible investors. Qualifying funds are not
economic contribution of the employer and the subject to regulatory control or supervision in relation to
qualifications of the employee. In a significant policy set up or ongoing operations. Offer documents issued by
development, authorities in Jersey have demonstrated an eligible investor funds are exempt from the usual
increased willingness to grant “essentially employed” requirement to obtain regulatory authorisation for
status to new businesses that meet the criteria for circulation. There are no structural or content
establishing a presence in the Island, particularly if it can requirements imposed in relation to offers made by
be demonstrated that the position cannot readily be filled eligible investor funds. In consequence, no investment
from within Jersey’s existing labour force. These restrictions or borrowing limitations are imposed by
individuals are subject to tax on their worldwide income at regulation and such funds can be fully flexible and
a rate of 20%. established on a fast-track basis. Eligible Investor funds
are nil rated for tax in Jersey.
Ogier has close links with the States of Jersey’s
Population Office (which administers the residency To conduct investment business in relation to an eligible
system) and can also assist in the acquisition of local investor fund and to avail itself of the 0% tax rate, again,
premises and associated matters. a Jersey resident investment fund manager would need
to be regulated for the conduct of fund services business
Serviced Offices as an investment manager.
Ogier is able to arrange the provision of dedicated
serviced office space for any investment manager
considering a physical relocation to Jersey. Our new
Investment Fund Management in Jersey
Jersey is an attractive jurisdiction in which to domicile
investment funds and their investment managers. Given
the recent UK and EU developments this proposition may
now be even more attractive for the investment fund
Author: Niamh Lalor, Senior Associate
Business and Trust Law Group
+44 (0)1534 504210
Ogier is an award winning offshore legal and fiduciary
services provider. The Group advises on all aspects of
BVI, Cayman, Guernsey and Jersey law and associated
fiduciary services through a global network of offices
covering all time zones and key financial markets.
Ogier continues to be recognised as a leading law firm by
the principal legal directories, including Legal 500 and
Investment Fund Management in Jersey
+44 (0) 1534 504270
Phil Le Cornu
+44 (0) 1534 504225
+44 (0) 1534 504280
+44 (0) 1534 504240
+44 (0) 1534 504252
This client briefing has been prepared for clients
and professional associates of the firm. The
information and expressions of opinion which it
contains are not intended to be a
comprehensive study or to provide legal advice
and should not be treated as a substitute for
specific advice concerning individual situations.
Ogier includes separate partnerships which
advise on BVI, Cayman, Guernsey and Jersey
law. For a full list of partners please visit our