Isle of Man Cleared in Bizjet Tax Avoidance Review

 - October 17, 2019, 1:15 AM

The UK government’s review of how the Isle of Man administers tax on aircraft and yachts has found no evidence of value-added tax (VAT) avoidance—although it has recommended additional post-registration compliance checks. The review’s findings were published yesterday after an in-depth investigation into the application of aircraft and yacht VAT rules in the Isle of Man, and whether its rules and procedures enabled importation of private jets into the EU without paying the correct amount of VAT.

The Isle of Man is a self-governing British Crown Dependency that is outside both the UK and European Union, but part of the UK for VAT purposes. Following a series of allegations of VAT avoidance in late 2017 stemming from BBC Panorama’s “Paradise Papers” documentary, the Isle of Man government invited HM Treasury to carry out a review of its VAT rules and procedures regarding aircraft and yacht importations.

The central finding is that allegations of widespread VAT avoidance on aircraft and yachts were not upheld, with the report recognizing that the Isle of Man government carries out extensive and effective compliance checks during VAT registration. It recommended further compliance checks in the years after registration to ensure that the right amounts of VAT continue to be collected.

“The Isle of Man government has already started to implement improved compliance procedures in light of these recommendations,” reported HM Treasury, the UK government department that runs the country’s finances.

“The work carried out by HM Treasury has also highlighted the complexity in international VAT rules and the report notes that there may be merit in a wider review of these rules if EU member states and other jurisdictions deem that more tax should be collected on these activities,” it continued.

“This is a matter of considerable public importance, and the Isle of Man government rightly agreed to a full review," said Financial Secretary to the Treasury Jesse Norman. "I am pleased to confirm that the reviewers have found no evidence of widespread VAT avoidance. My officials look forward to working closely with [Isle of Man officials] to provide advice and guidance throughout the implementation [of post-registration compliance checks] and in the future.”

In conclusion, the HM Treasury statement noted, “Detailed work has been carried out on the published Paradise Papers data which revealed that less than 2 percent of the data released by the International Consortium of Investigative Journalists relates to UK individuals or entities.

"HM Revenue & Customs (HMRC) has reviewed over 300 corporate groups and individuals from its customer population who were identified in the documents. For approximately 80 percent of these, the structures identified have no UK tax consequences or were already known to HMRC. For the remaining 20 percent, where new information is available, these are subject to ongoing examination by HMRC, who will take robust compliance action wherever appropriate.”