Pay and File

With effect from 6 April 2007, the Income Tax (Corporate Taxpayers) Act 2006 changed the way in which companies in the Isle of Man are taxed (including the Distributable Profits Charge and Loans to Participators); from a year of assessment basis to an accounting period basis' pay and file' system.

As companies will be assessed on an accounting period basis, returns will be issued at the end of a company’s accounting period. The due date for the filing of company tax returns is 12 months and one day after the end of the accounting period. This is also the date by which payment of any income tax liability or charge must be made. Returns can be filed and payments can be made before the due date.

If the return is not filed by the due date, a late return penalty will be charged. A second penalty will be charged if the return is still outstanding six months after the due date. Interest may be charged on any income tax liability or charge that is not paid by the due date, and will be calculated from the due date; no matter when any form of payment notice was issued.

Introduction of Compulsory Online Filing for Corporate Taxpayers 

Corporate taxpayer income tax returns for accounting periods ending on or after 5 April 2015 must be filed online.  

The statutory basis for compulsory online filing and specific exemptions are included within the legislation, which can be found in Statutory Document 2015/16 - Income Tax (Corporate Taxpayers) (Temporary Taxation) Order 2015. 

Full details of how to complete the income tax return online can be found in the following two guides – Guidance Note 52 (Accounting periods up to 31/12/2019) or Guidance Note 58 (Accounting periods after 31/12/2019).

A consultation exercise was undertaken prior to the implementation of this legislation and the relevant documentation is available.

Composite Company Distribution Voucher

The Income Tax Division has published a composite company distribution voucher model which can be issued to shareholders by companies making any type of distribution, including attributed income.

The voucher can also be used as a Certificate of Attribution. 

The Division has issued the following documents concerning the company pay and file system:

Document Name	Number	Date of issue
The Pay and File Income Tax System for Companies	GN 38	November 2009
R1C Company Return Form Guidance Notes	GN 39	16 May 2007
TCN list	n/a	16 May 2007
Practice Note 143/07 Company Income Tax Return Form Requirement for Accounting Periods ending on or after 6 April 2007	PN 143/07	4 May 2007
Corporate Income Tax Regime – the New Basis of Assessment	PN 139/06	23 November 2006
Repeal of Special Company Income Tax regimes from 6 April 2007	PN 135/06	28 June 2006
Corporate Income Tax Regime Consultation Response Document	n/a	27 February 2006
Corporate Income Tax Regime Proposal Document	n/a	3 October 2005

The following amendments and additions have been made to GN 38, The Pay and File Income Tax System for Companies, in the November 2009 release (the previous versions can be found in Downloadable Documents):

Section	Details of Change
12 – Dividends and Distributions	Amended to explain that there have been changes in treatment and summarises each very briefly.
12.2 – Distributions from Reserves	Updated to include details of revision of concession to treat all as capital publicised in GN41 from 6/4/2008, then details of new practice set out in PN 156/09: 6/4/06 to 5/4/08 – Capital from pre-2000 and non-refundable credits 6/4/08 to 5/4/09 – all capital 6/4/09 – 100% of current year first before capital can be accessed. (include transitional accounting periods) Examples included for current practice and confirms that genuine capital distributions can still be made (i.e. profits on sale of assets, profits taxed at >18%) at any time. Clarifies that this treatment only applies to 'Distributions from Reserves' as defined on the PN and in the glossary, and that it is still possible to mix and match with current year profits and reserves accumulated since April 2006
12.3 – Company Distributions – Special Cases	Noted to state that concession has changed and that the details only relate to a specified date range.
New Section 12.4 – Composite Company Distribution Voucher	New section that explains the purpose of the voucher. (i.e. a single voucher for all payment types, simple to identify which payments are income or capital and to include with individual return form as a schedule) Includes a more detailed explanation of the payment types and where vouchers are required in statute and which are voluntary.
13.4 and 13.5	Confirmation that the examples here outline the historic treatment of distributions from reserves.
14 – Glossary	Includes a definition of 'Distribution from Reserves' from PN 156/09 and clarified definition of “Taxed Reserves”.
Appendices –	Composite Company Distribution Voucher and text of PN 156/09

The following amendments and additions have been made to GN 38, The Pay and File Income Tax System for Companies, in the May 2008 release (the previous versions can be found in Downloadable Documents):

Section	Details of Change
5.3	Additional information on interest and repayment supplement has been included together with new guidance on tax deducted at source.
6	Additional guidance on when assessments will be issued by the Division.

The following amendments and additions were made to GN 38 in the February 2008 release (the previous versions can be found in Downloadable Documents):

Section	Details of Change
6	Amended to advise that assessments will not be issued to companies with income subject to tax at 10% or a liability greater than £0. Also amended to advise of the availability of all assessments on Online Tax Services or on request from the Division.

The following amendments and additions were made to GN 38 in the October 2007 release (the previous version, issued in April 2007, can be found in Downloadable Documents):

Section	Details of Change
9	New section added detailing the withholding tax requirements for a variety of payments to non-residents
10	New section defining income distributions, particularly in relation to companies incorporated under the Isle of Man Companies Act 2006
15	New section detailing the methods available for making a payment to the Income Tax Division
12.3	New subsection added to confirm the treatment of intra-group distributions from old reserves
5.1.1	Amended to include the amount of the initial and extended late return form penalty
Various	Correction of a small number of typographical and mathematical errors in examples and updating of the website address
Various	Consequential renumbering of sections and cross references following the addition of sections 9, 10, 15 and 12.3