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UK government review finds no wrongdoing over aircraft VAT in Isle of Man

Thursday, 17 October, 2019

A UK government review has found no evidence to support allegations that the Isle of Man government allowed private individuals to avoid value-added tax (VAT) on Manx-registered private aircraft and yachts.

The allegations were made after leaked documents (the so-called Paradise Papers) suggested that nearly a thousand aircraft had been imported through the Crown Dependency by high-net-worth individuals to avoid tax. The suggestion was that an individual disguised an aircraft as a business asset available for chartering to third parties, while retaining its exclusive use for leisure purposes. This allowed the owner to recover the VAT they paid when importing the aircraft to the Isle of Man, from where it could be exported anywhere in the EU for business purposes, free of VAT.

Manx Chief Minister Howard Quayle asked the UK government to undertake an independent investigation of the allegations. The UK and Isle of Man had previously agreed to harmonise their VAT law, which in the field of leisure craft is 'incredibly complex', as HM Treasury junior minister Jesse Norman acknowledged in a letter to Quayle.

The UK department responsible, HM Treasury, has now reported back with the finding that the allegations were not upheld. 'UK and EU VAT law had been correctly implemented in the Isle of Man, which carries out extensive and effective compliance checks during VAT registration', it said.

However, HM Treasury recommended that the Manx government should implement further compliance checks in the years after registration. The Isle of Man Government has already started to implement improved compliance procedures in light of these recommendations, it said.