No Nasty Surprises Expected In Isle Of Man Budget

by Jason Gorringe, Tax-News.com, London

11 February 2004

Next week’s Isle of Man budget is likely to focus on changes to the tax system in order to stay on the right side of its international obligations, although reports suggest that there are to be no major surprises for business in the jurisdiction.

“It is possible that we will see minor, perhaps inflationary, changes to allowances and tax bandings in existence,” observed Kevin Cowley, senior taxation manager at Deloittes, according to the Isle of Man Online, suggesting that the main corporate and personal income tax rates should remain unchanged.

However, Mr Cowley believes that the UK budget, to be announced by Gordon Brown in March, is likely to have a more significant impact on the island, as it is probable that it will contain changes directly affecting offshore jurisdictions.

The main candidates for change if this is the case will be the tax rules concerning foreign domiciles resident in the UK, and offshore fund shareholdings, according to Mr Cowley.

Last month, Treasury Minister Alan Bell promoted new income tax legislation that he said “continues the modernisation of the Island’s tax system by making it simpler, fairer and consistent with international standards."

The main changes contained in the Income Tax (Amendment) Bill 2004 included:

• Extension of the current year basis of assessment to all income received by individuals and other non-corporate taxpayers, including income from investments, self-employment and other sources. (Income from employment is already on a current year basis).
• Two months longer – five months instead of three months – to make a tax return. But overdue returns will be subject to a new £50 penalty after September 2005 and the Bill also updates offences in relation to returns more than two years overdue.
• Newly defined powers for the Assessor of Income Tax to obtain documents including material relevant to the international exchange of tax information on request, in line with the Island’s commitment to the OECD.
• Provisions to prevent the avoidance of Manx tax by company directors, for example, using company loans to exploit the differential between corporate and personal income tax rates.

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