VAT and Customs in the Isle of Man
Current VAT registration and deregistration limits
The VAT registration limit from the 1 April 2017 is £85,000 per annum.
You should remember that this is taken over a rolling period of 12 months, not just over your financial year.
The deregistration limit is £83,000 from 1 April 2017.
Claiming input tax
The goods or services being claimed for must have been provided to the person who is currently registered for VAT. If this is the case you can go back 6 months for services, provided they were not related to goods which you disposed of before you were registered. For goods you can go back 4 years before registration provided that the goods are still on hand. The VAT Guide, notice 700 section 11 gives more details.
New VAT registration for recently formed Limited Companies
Yes you will, as the legal status of the registration has changed. However you can retain the same registration number if you wish, by filling in a form VAT 68 at the same time as the new registration forms. Form VAT 68 can be downloaded on this page.
Charging VAT on the sale of your business as a going concern
If the person you are selling your business to is operating the same kind of business, is registered for VAT at the time of the sale, is opening for business immediately after the sale and is using the assets purchased to operate the business, then the sale is not considered to be a taxable supply, and VAT should not be charged. VAT notice 700/9 - Transfer of a business as a going concern gives more information and all conditions.
Keeping your books and records
Six years. But this can be reduced under certain circumstances. See notice 700 'The VAT Guide', paragraph 8.1.
Paying VAT by electronic means
You can use BACS, CHAPS or Bank Giro Credit Transfer. By using 1 of these methods we will allow you another 7 days to pay your VAT.
See downloadable documents for our notice on electronic payments for further details.
If you have enrolled to use the online service for rendering your VAT return, there is an additional facility to pay by debit or credit card.
How to make one VAT return per year
By applying to use the Annual Accounting Scheme you can reduce the number of VAT returns from 4 to 1 per year. The upper turnover limit for using the scheme is currently £1,350,000. In most circumstances, by using this scheme you will make 9 payments each of approximately 10% of the VAT payable, and 1 final balancing payment. Thereby spreading your liability over a greater time period, as well as substantially reducing the amount of administration involved in running your business. See VAT notice 732. See downloadable documents for the application form to join the scheme.
Accounting for VAT on a cash received basis
VAT is normally due and payable at the time when a supply of goods or services is treated as having taken place. This is called the tax point. You must account for VAT in the tax period that the tax point occurs unless you use the Cash Accounting Scheme. This scheme allows you to account for output tax on the basis of payments you receive, rather than on tax invoices that you issue. This may be helpful to your cash flow, especially if you allow your customers extended credit or suffer a lot of bad debts. The upper turnover limit below which business can use this scheme is £1.35 million. VAT notice 731 explains in more detail.
How the reduced rate of VAT on domestic property repairs works for properties in the Isle of Man
Contractors working on properties in the Isle of Man can charge the reduced rate of 5% VAT on the majority of household repairs, renewals and extensions. Ineligible properties include shops, offices, hotels and commercial buildings. The supply of goods only is not allowed. To qualify the goods must be supplied and installed. See downloadable documents for the public notice about the reduced rate of VAT on domestic property repairs.
Reclaiming VAT on materials when building your own house
There is a scheme called the DIY Refund Scheme which allows individuals who build new houses, or convert non-residential properties into dwellings for their personal use to recover VAT on certain building materials. For further information please consult the guidance notes on completion of forms VAT 431NB MAN for new houses and VAT 431C MAN for conversions.
Is VAT payable by charities?
Under normal circumstances VAT is payable on supplies made to and by charities, but there are some exceptions such as fund raising events which may be exempted. Advertising services to charities, the supply of sea rescue equipment, donated medical and scientific equipment, medicinal products and equipment for use by disabled people can be zero rated. For more information please see VAT notice 701/1.
Fuel scale charges
If you use a motor car in your business and claim back VAT on the road fuel then you must consider whether to pay scale charges or not. These charges are to cover any private element of the fuel bought. By paying the scale charge you can recover all of the VAT on the road fuel, both business and private. You have the option not to pay the scale charge but if you do so then you cannot recover the VAT on fuel on any cars that are used by your business for business and private use.
Supplies of commercial buildings which would normally be exempt from VAT will, in the majority of cases, be standard rated if you elect to waive exemption (opt to tax) the property. This should allow you to recover some or all of the input tax you incur in making the building ready to receive income.
Once you have opted to tax a property you must charge VAT on all the supplies you make from it. For example , if you charge VAT on rents received you must also charge VAT on any subsequent sale of the building. An option cannot be made retrospectively. For more information on this complex subject please refer to VAT notice 742 - Land and Property.
Bad Debt Relief - Claiming VAT back on bad debts
There is a scheme called Bad Debt Relief. To claim this you must:
- Have already accounted for the VAT on the supplies and paid it to Customs and Excise
- Written off the debt in your VAT accounts and transferred it to a bad debt account
- The debt must be over 6 months old
Where a part payment is received, the amount of bad debt relief claimed must only relate to the part of the balance still outstanding.
If, after having claimed bad debt relief you subsequently receive part or full payment of the debt then you must account for VAT on any amount received.
Correcting mistakes on VAT returns
The simplest way to tell us is to use form VAT 652 MAN Notification of Errors in VAT Returns, which is for reporting errors on previous returns.
The error correction reporting threshold applies to net errors that are the greater of:
- £10,000, or
- 1 per cent of the Box 6 figure required on your VAT return for the period when you discover the error - subject to an upper limit of £50,000 or above which must be reported to IOM Customs and Excise.
If there are errors, which you have not disclosed and we discover them you could incur a penalty.
Further details may be found in VAT Notice 700/45 - How to correct VAT errors and make adjustments or claims.
Countries in the European Union
- Czech Republic
- Irish Republic
- Spain (but not the Canary Islands
- UK (but not the Channel Islands)
Calculating VAT on cars from an EU country
Take the purchase invoice value in whatever foreign currency you paid for the car, and convert it to sterling using the Customs period rate of exchange. This is the value for VAT purposes. Remember to include any extras or options you ordered with the car. Multiply this value by the current standard rate of VAT to give the figure payable. If you are paying the VAT here you will need to complete the form NOVA 1 MAN and present it with your purchase invoice and temporary log book or registration certificate.
Paying VAT or other duties on motor vehicles from outside the UK/IoM
Depending on where you purchase the vehicle from, and whether the vehicle is new or used, and if any reliefs are available to you, there may be VAT and duty payable.
Regardless of whether any charges are due, you will require clearance from Customs and Excise before registering your vehicle with the Department of Infrastructure. Please see leaflet NOVA 3 MAN for further information.
Paying tax on your car or household items when moving to the island from outside the EU
Provided you have lived abroad for more than 12 months and have owned and used the goods for more than 6 months you may bring them in free of duty and VAT under the transfer of residence relief. You must not sell the goods or vehicle for 12 months otherwise duty and VAT will be payable.
Duty and VAT payments on alcohol and tobacco sold on the internet
If you order alcohol or tobacco products from an EU member state other than the UK on a commercial basis this is known as distance selling. Both excise duty and VAT must be paid on such purchases. It is illegal if the goods are imported without paying the duty and VAT. The sender should have arranged to pay any duty and VAT before dispatch. It is in your interest to ensure this has been done, otherwise the goods will be liable to seizure by Customs.
Duty free allowances when travelling abroad
If you are travelling from outside the EU (this includes the Canary Islands, Channel Islands and Gibraltar) the allowances from 1 October 2011 are as follows :
|4 litres||of still table wine|
|1 litre||of spirits over 22% volume or|
|2 litres||of fortified wine, sparkling wine or other liquers|
|£390||worth of all other goods including perfume, gifts and souvenirs, or|
|£270||worth of goods if travelling by private plane or boat for pleasure purposes|
|16 litres||of beer|
If travelling from the EU, you may be asked questions if you have more than:
|20 litres||fortified wine|
|90 litres||still table wine|
Please note: There are conditions that apply to your allowances. These include:
- If you are under 17 you cannot have the tobacco and alcohol allowances.
- You are entitled to these allowances only if you travel with the goods and do not sell them.
- If you bring in something worth more than your goods allowance, you must pay charges on the full value, not just the value above the allowance.
- You and anyone you are travelling with cannot pool your individual other goods allowances to bring in an item worth more than the limit. The person bringing in the item will have to pay charges on the full value of the item.
New rules regarding reverse charging on supplies of specified goods
From 1 June 2007, new rules apply to sales of specified goods (currently mobile phones and computer chips) and supplies made in excess of £5000 are now subject to the reverse charge treatment.
If you make supplies of specified goods in excess of £5000 you will be required to complete a Reverse Charge Sales List (RCSL). This information will be required to be supplied to Isle of Man Customs and Excise electronically as a CSV file.
Yacht chartering and leasing
Her Majesty's Revenue and Customs issued Revenue and Customs Brief 56/09 - VAT Treatment of Yacht Chartering or Leasing Activities - on 26 August 2009. The guidance contained within the Brief applies to the Isle of Man and therefore supersedes and replaces the guidance previously issued by Isle of Man Customs and Excise in January 2000 (commonly referred to as the Yacht 2000 letter).
This new guidance was further augmented on 26 April 2010 by a Practice Note providing additional information about acceptable Isle of Man based yacht chartering and leasing structures