Guernsey, Channel Islands

Corporate - Deductions

Last reviewed - 20 August 2020

Normally, business deductions are allowed if they are incurred wholly, exclusively, and necessarily for the purpose of the business.

Depreciation

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:

Assets Basis Rate (%)
Buildings:    
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
Computer hardware Straight-line 20
Machinery and plant Reducing-balance 20
Glasshouses:    
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.

Goodwill

The amortisation of goodwill is not a deductible expense in Guernsey.

Start-up expenses

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 expenses

Interest is a deductible expense where it is incurred wholly, exclusively, and necessarily for the purposes of the business.

Bad debt

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 contributions

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.

Taxes

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.