Isle of Man VAT System
This fact sheet has been designed to provide businesses with international transactions with an overview of the Isle of Man VAT system and planning opportunities.
Scope
Value Added Tax (“VAT”) is a tax charged on taxable supplies, of goods, services or both, made or deemed to have been made in the Isle of Man. It is administered
and received by the Customs and Excise Division of the Isle of Man Treasury.
Registration
Thresholds
The threshold for registration in the Isle of Man is currently £67,000 and a natural or legal person which makes taxable supplies has to apply to register for VAT and
then make periodic VAT returns. They may apply to register before commencing business but must apply to register (later) within thirty days of the turnover threshold being
exceeded.
Penalties arise for late registration (see below).
Distance Selling
A supplier in another member state (and for this purpose the United Kingdom is not “another” member state) can supply goods to non-VAT registered persons in the
Isle of Man without registering for Isle of Man VAT provided the total of such sales does not exceed £70,000. If the total of such sales exceeds £70,000, the supplier
should apply to register in the Isle of Man.
VAT Rates 2009
Standard Rate 15%
All goods and services unless specifically excluded.
Reduced Rate 5%
Applies to a specific list which includes, for example, holiday accommodation (including hotels), the renovation and repair of dwellings, conversions to dwellings, domestic fuel
and power, children’s car seats.
Zero-Rated Supplies Exempt Supplies and Supplies outside the Scope of VAT
Includes food for humans and animals, books, newspapers, music, construction of residential buildings, international services, transport, gold, banknotes, medicine, insurance,
post, finance, education, health and welfare, works of art, the transfer of the assets of a business where the business is transferred as a going concern, dividends to shareholders,
rates and government fees, insurance claims, loans, salaries, official grants.
Filing
VAT Returns
VAT–registered taxpayers must complete and file VAT returns in respect of three-month periods (which are not necessarily calendar quarters) within one month of the end of the
relevant period. Where the return shows sums due to the VAT authorities, payment of the VAT due must, subject to minor exceptions, be made no later then the date by which the
return is due.
In relation to acquisitions from or despatches to other member states, an “Intrastat” declaration must be completed monthly and submitted within ten days of the end
of each period.
Filing Penalties
For failing to submit a return or to pay the VAT due on time (or for various other acts of non-compliance), there will arise a liability to interest and there may arise a
liability to penalties; the approach of the VAT authorities to penalties will depend on the supplier’s return and payment history. In the case of a particularly bad VAT
payment or return-filing history, the supplier may be required to make what is effectively an advance payment of VAT.
Time of Supply Rules
VAT is, in general, accounted for at the “tax point”, which is the time of supply of goods or the time at which services were performed. In certain circumstances,
however, the “tax point” may be some other date.
Bad Debt
Where an invoice is unpaid six months after becoming payable and the supplier has written off the invoice in its records, the supplier may claim relief under the bad debt relief
scheme. Conversely, a non-paying customer who is registered for VAT must refund to Customs & Excise any input tax previously reclaimed in respect of invoices unpaid six months
after becoming payable.
Grant Thornton (Isle of Man) Limited, April 2009
For more information please contact:
Dennis McGurgan: dennismcgurgan@grantthornton.co.im
Kathy Martin: kathymartin@grantthornton.co.im
or
Grant Thornton (Isle of Man) Limited
P O Box 307
Exchange House
54-58 Athol Street
Douglas
Isle of Man
IM99 2BE
Tel: + 44 (1624) 639494
Fax: + 44 (1624) 662249