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Urgent statement to Tynwald by Chief Minister on VAT treatment of aircraft and yachts

Wednesday, 16 October 2019

By: Hon Howard Quayle MHK, Chief Minister

Mr President, Honourable Members. 

Two years ago the Isle of Man Government requested HM Treasury to undertake a review of how the Isle of Man Customs and Excise division administered VAT in relation to aircraft and yachts. 

As Honourable Members will recall, this review was requested as a result of unsubstantiated media reporting of the so-called Paradise Papers. 

The reports suggested that yacht and aircraft-owning entities were being registered for VAT purposes in the Isle of Man because of the incorrect application of EU VAT law by the Isle of Man authorities. 

I stand here Mr President, to say that the HM Treasury report, that is being published today, concludes, that the Isle of Man Government has implemented VAT regulations correctly. 

The accompanying letter from the Financial Secretary to the Treasury, Jesse Norman MP, states:

'I am pleased that the Isle of Man Government has been found to have complied with UK and EU VAT laws on this matter.' 

Media reports at the time suggested that the number of aircraft registered in the Isle of Man Aircraft Registry indicated how many aircraft-owning entities were registered for VAT. There is, in fact, no link between the two. 

They also went on to allege that aircraft were being used for leisure purposes by owners who then falsely claimed that the plane was being used for business purposes in order to claim the VAT back. 

We have always maintained that the Isle of Man Government has followed the same UK and EU laws in relation to the importation of yachts and aircraft. Mr President, Honourable Members I am pleased that the review has provided confirmation of this. 

In addition, HM Treasury’s review confirms that our Customs and Excise teams followed the EU VAT Committee guidance by gathering and considering extensive information regarding the use of the aircraft. 

Honourable Members, the review finds there is no abuse of VAT principles in the Isle of Man. 

The report recognises the complex international nature of VAT laws, and such a significant audit of our work has highlighted some concerns over the level of post-registration assurance activity that is undertaken by our Customs and Excise division. 

These concerns are noted and are being addressed. 

We have increased both our resources and our expertise in post-registration assurance and will be considering how best to further strengthen the expertise of our officers with regard to yachts and aircraft. 

Honourable Members will recognise that VAT legislation and regulation is a particularly complex area and I would like to thank the dedicated officials in HM Treasury and HMRC for undertaking this detailed and thorough review. 

The UK Government and the Isle of Man Government have a long-standing and close working relationship regarding the operation of the VAT agreement, and I am pleased to learn that this review has served to strengthen those ties. 

The newspaper and TV reports cannot be unwritten. 

In them, we pledged on numerous occasions that we would take swift and decisive action if there was any evidence of wrongdoing in the Isle of Man. 

We were right to make that statement and we were right to request the review. 

Now the review has rightly confirmed that there was no wrongdoing, and that we followed the rules and laws as we should have.

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Please note: these are speaking notes and may differ from the speech as delivered.

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