Much about the way business is done has changed since the budget a few months ago, and it would be easy to overlook the structural changes announced. But at a time when the growth of our economy is more crucial than ever, it is important to look at what impacts some measures in the budget could have.
In this year’s UK budget, chancellor Rishi Sunak announced a review of the UK funds regime in order to explore the attractiveness of the UK as a base for asset management.
It is crucial, today more than ever, for jurisdictions to adopt forward-looking and progressive attitudes in order to remain competitive. And Gibraltar, which has long been acknowledged as a pioneering and trailblazing financial centre, (just look at our Distributed Ledger Technology regulatory framework as an example of this) continues to ensure that its funds regime remains ahead of the curve.
Gibraltar has, for many years, offered a competitive tax regime, for both funds and individuals managing them, and it is interesting to see how the UK will include a review of “direct and indirect tax” as well as the “VAT treatment of fund management fees” in its overall funds’ regime review. Precisely what changes will be introduced remains to be seen, however, it is interesting to see long-standing components of Gibraltar’s funds regime only now being considered, for example the potential exclusion of VAT, which is already a competitive advantage for Gibraltar.
However, also of significance, the UK Government announced a consultation to introduce new market access arrangements for financial services between the UK and Gibraltar.
This reaffirms the UK Government’s commitment to Gibraltar, creating a de-facto single market for financial services between the two jurisdictions. This gives Gibraltar a clear edge on other jurisdictions, as it will be the only jurisdiction to have direct and secure access to the UK market following Brexit.
The consultation discusses the UK Government proposal to create the Gibraltar Authorisation Regime of “GAR”, which aims to protect consumers and financial stability, promote the safety and soundness of firms in the UK and Gibraltar and ensure that consumers continue to benefit from a choice of financial products.
It will also respect Gibraltar’s regulatory autonomy and reflecting the close and unique relationship between the UK and Gibraltar. GAR will allow Gibraltar-based financial services firms to access the UK market as “authorised persons” under the Financial Services and Market Act 2000, without having to apply for full UK authorisation from UK regulators.
Once the new regime comes into force, the UK Government is proposing that Gibraltar firms currently operating in the UK and intending to continue to do so undergo a process of notification to obtain GAR authorisation. Existing firms will notify the Gibraltar Financial Services Commission (GFSC) of their intention, or not, to continue carrying on certain activities, and in turn, the GFSC will notify UK regulators.
Gibraltar-based firms intending to operate in the UK for the first time will also be required to notify the GFSC and obtain the GFSC’s consent to carry on the regulated activity in the UK. The regulated activities which the GFSC can consent to will be those which are approved activities under HM Treasury’s regulations.
Indeed, the UK Government’s consultation follows into a pattern of a further strengthening commercial environment in Gibraltar, through moves both locally and internationally, cementing it as both a leading robust and respected financial centre, as well as enjoy meaningful integration into the UK market.
Another significant step in Gibraltar’s relationship with the UK also came another step closer in a myriad of changes in the budget, the UK Government published a statutory instrument ratifying the Double Tax Agreement between the UK and Gibraltar, signed in October 2019. The agreement set out provisions for a clear framework for the taxation of companies that work cross-jurisdiction between the UK and Gibraltar.
The continued prosperity of Gibraltar, its residents and businesses, seems like a top priority for both governments. When giving a speech at GFIA’s annual dinner, Albert Isola, Minister for Digital and Financial Services, summed up the message that the local government is trying to sound: “Gibraltar is open for business. Bring your ideas to us, and we will do our job and do everything possible to help your businesses prosper.”
In a climate of great uncertainty, it is surely only a matter of time before more and more businesses realise they are looking for the stability only a rock can provide.