Guernsey, Channel Islands
Normally, business deductions are allowed if they are incurred wholly, exclusively, and necessarily for the purpose of the business.
Annual allowances are granted for income tax purposes in respect of certain items, the most common of which have been set out below. Please note this is not a complete list:
|Stone, brick, concrete, or other substantial structures||Reducing-balance||1.25|
|Buildings of a less substantial construction||Reducing-balance||5|
|Farm buildings||Straight-line||5, 10, or 20|
|Motor vehicles, buses, lorries, and motorcycles||Reducing-balance||25|
|Machinery and plant||Reducing-balance||20|
|Expenditure in respect of initial allowance*||Straight-line||10|
* Section 123 (3) of the Law defines expenditure and circumstances on which initial allowances can be claimed in respect of glasshouses.
The amortisation of goodwill is not a deductible expense in Guernsey.
Pre-trading expenditure incurred within the 12 months prior to the commencement of trade, which would have been allowable had it occurred on the first day of trading, may be allowed as a deduction in computing the profits of the first accounting period.
Interest is a deductible expense where it is incurred wholly, exclusively, and necessarily for the purposes of the business.
Bad and doubtful debts discovered in the accounting period to have become bad or irrecoverable may be deducted from taxable profits, but the deduction may not exceed the amount written off as such in the books of the business.
Charitable donations by companies are not deductible for Guernsey income tax purposes.
Fines and penalties
Fines or penalties incurred are not deductible for Guernsey income tax purposes.
Income tax paid is not deductible in computing taxable income.
Net operating losses
Losses from one class of income may be used to offset the profits from another class of income if both classes are subject to tax at the same rate. Unrelieved trading losses may be carried forward to offset future trading income.
Upon cessation of trade, operating losses arising from balancing allowances may be carried back to the previous two years of charge to be relieved against past trading profits.
Payments to foreign affiliates
Guernsey-source royalties and long-term interest are subject to taxation at source. Relief is obtained by the retention of the tax deducted. Short-term interest, unless owed to an authorised bank, is not deductible, unless the advance in respect of which it is paid is used wholly and exclusively for the purposes of trade. Other fees must be paid on an arm’s-length basis.