Gibraltar Magazine – November 2017
Ian Le Breton
It is some time since I dedicated a column to Brexit but I am, it seems, firmly in the minority. The UK press in particular can’t get enough of the subject and we are bombarded with a daily dose of related stories, both good and bad, depending on their respective political leanings.
At the end of the latest round of negotiations, the European Union’s chief negotiator Michel Barnier and his UK counterpart David Davis hailed progress and there is growing hope that talks may be extended to include the UK government’s new goal of a two-year transition deal — effectively delaying the full effects of Brexit until 2021.
However we must work on the basis that at the end of March 2019, the UK – and by extension Gibraltar too – will no longer be part of the EU. Sure, there are things we don’t yet know but our departure from the bloc is more or less set in stone.
It is no secret that I was part of the overwhelming 96% majority who voted in Gibraltar to ‘remain’. I regret the result but am certainly not a “remoaner”. Indeed I am becoming progressively more optimistic about the opportunities that will doubtless present themselves. So this is not another ‘Project Fear’ piece; on the contrary in fact.
It concerns me that we are becoming used to scare stories about businesses leaving Britain although it is undoubtedly the case that some are leaving. In particular, a number of banks are transferring teams to existing or indeed brand new operations across Europe. And there must be foreign firms out there who have taken the decision to cancel planned expansion or even initial market entry into the UK as a result of the continuing uncertainty.
Both Malta and Cyprus have seen an upsurge in interest in their respective jurisdictions both from UK companies seeking to retain an EU base post-2019 and also from firms based in third countries that are keen to operate via an English speaking country in the EU. But there is an area that, in my view, has not yet been fully exploited. Hence the title chosen for this month’s article.
Consider this. Britain’s departure from the 28-country bloc will undoubtedly cause issues in the UK in respect of our relationship with the remaining 27 EU countries. But what about European companies, and indeed those from further afield, that will suddenly be cut off from the highly lucrative UK market. Britain remains the fifth largest economy in the world – after the US, China, Japan and Germany – and is still therefore a hugely attractive prize as a market. Who would not want to deal with Britain?
A recent example of an international company committing to the UK (in my view because of, not despite, Brexit) is Wizz Air. The largest low-cost airline in Central and Eastern Europe, it has recently established its first UK base at Luton. I am not aware of Wizz’s financial arrangements (and if I were, I certainly couldn’t write about them!) but, in my view, this is one example of what I hope will be a huge influx of foreign firms seeking to exploit the British market, be they airline passengers or indeed consumers of any other product or service.
But the good news should not end there. Enter Gibraltar.
Since the UK referendum in June last year, the government of Gibraltar has stressed time and time again the importance of the UK to Gibraltar business. Financial services – insurance being one standout example – are key to the ongoing relationship between the Rock and Britain and this is set to continue. In my own firm’s case we are strengthening our links on a daily basis and there is more to be done. But how?
Those of us working in international financial services tend not to use the “offshore” word so much these days. In my view, that’s a shame because we all know what we mean by the term. Unfortunately, the reality is that a series of scandals has rendered the very word virtually unusable in polite company. In time I imagine that when one says “I work offshore”, we would expect to be discussing life on an oil rig rather than life in a gleaming bank edifice shimmering amongst the palm trees in some far away paradise.
These days then, I prefer to use the word ‘international’ and, in the context of Gibraltar’s post-Brexit relationship with Britain, how about ‘International UK Services’? I have written many times previously about the advantages of using Gibraltar companies but now is maybe the time to place more emphasis on a UK context. To this end, let’s consider a hypothetical situation.
Company X provides goods and services to the UK. It is based far away in ‘Somewhere-Land’. The owners are about to send a few of their nationals to the UK to set up and run the business for a few years before their British hires are ready to take over. The foreign owners are much enamoured of the British system in general, but are not so keen on retaining all their profits in the UK nor dealing with all the red tape they have heard about – not to mention the British weather.
Gibraltar offers some obvious advantages. A holding company structure could be established here and a range of different relationships could then be established with the underlying trading company in Britain. Gibraltar companies are flexible, easy to incorporate and, given the right advice, adaptable as needs of shareholders change.
The executives could even base themselves here in Gibraltar (subject to complying with our residency rules naturally). There is no withholding tax between the UK and Gibraltar, nor when remitting funds from here to ultimate parent companies abroad. Gibraltar also offers a low rate of corporation tax, just 10%, and is blissfully free from many other complex taxes that are commonly regarded as hurdles to business growth in the UK. In Gibraltar there is no capital gains tax, wealth tax, sales tax or value added tax.
Other corporate services can be provided here including the full range of company risk management – such as insurance cover for company directors and officers. Banking and accounting can be managed locally and there are more than sufficient lawyers on the Rock to satisfy any corporate legal requirements that may arise.
But the benefits go further. With careful planning it is possible to arrange for the ownership of the Gibraltar company itself to be held in Gibraltar. Last month, I discussed ‘foundations’, which is an exciting new product that local practitioners can offer to clients from civil law jurisdictions who are neither familiar nor comfortable with the ‘trust’ concept.
Whilst Gibraltar is not considered to be a particularly low cost jurisdiction, it is certainly much more affordable in terms of staff and accommodation costs than its competitors in the Channel Islands or Switzerland. There are generous residency schemes available here and, of course, the lifestyle is difficult to match.
For international firms considering their future plans in the UK, the message is simple. Embrace Brexit because it is going to happen. Think of Gibraltar as ‘International UK’, set up your headquarters here and then ‘passport’ your goods and services into Britain. It makes sense and we have all the resources anyone might need right here.
The future is Brexit. Despite everything, I am now convinced that the future in Gibraltar is bright indeed.