IoM Treasury Closes Short-Term Residence Tax Loophole

by Jason Gorringe, Tax-News.com, London

03 October 2002

The Isle of Man Online news service reported on Wednesday that the Manx authorities are seeking to close a tax loophole which allows short-term-resident landlords to avoid tax on rental income.

A measure limiting the short-term residence extra statutory concession was contained within Treasury Minister, Allan Bell's budget this year, and the department is now calling for comment on the planned amendment before the end of October.

Under the current rules, put in place in 1985, a non-Manx citizen who owns a property on the Island but does not live there for more than four months in any two consecutive years is not liable for tax. The concession was initially introduced in order to make it easier for UK residents to retire to the Isle of Man.

However, according to Nick Williamson, a Deloitte and Touche director, a 'handful' of landlords are abusing the provision by keeping a small flat on the Island, in addition to their other properties, in which they only need to reside for one day per year to qualify for the substantial tax break.

According to the IoM Online: 'Treasury is proposing that the concession is retained but modified so that a person qualifying for the concession will be treated for income tax purposes in a similar manner to a person who is not resident. The modification will ensure that any local source income received by a person falling within the concession, eg rents and dividends, will attract the same taxation liability as it would if paid to a non-resident individual.'

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