Isle of Man accused of lax VAT practices on private jets by EU
The Isle of Man has been accused of allowing private jet owners to dodge tax even when the rules say they should pay up.
According to the Reuters news agency, EU officials suspect Isle of Man authorities do not properly check whether people intend to use aircraft for personal or business reasons, and exempt jet buyers from paying VAT, or sales tax, even when they should.
“There are practices that we have reasons to think are suspect,” European tax commissioner Pierre Moscovici told French TV station BFM TV.
He said he had written to the UK’s Chancellor of the Exchequer, Philip Hammond MP, three weeks ago about the Isle of Man’s approach to VAT payments. “I asked that the rules be changed and, if they aren’t, the European Commission will launch an infringement procedure that can bear extremely heavy financial sanctions.”
No VAT is payable if a jet is used for business reasons, but it could be due if a jet is only used for personal reasons. The issue was highlighted during the recent Paradise Papers release of financial documents from offshore law firm Appleby, which has been covered extensively by media all over the world. The UK F1 world champion Lewis Hamilton came under scrutiny for avoiding paying tax on a UK-registered private jet, by importing it in the Isle of Man, that he used for both business and personal purposes.
An EU spokesman told Corporate Jet Investor: “In the case of the Isle of Man, we recently sent a letter to the UK authorities to request further information on the situation there. As you will certainly understand, we cannot enter into specifics as this investigation is at an early stage.
“If the results confirm that this activity is indeed ongoing in the Isle of Man without being properly tackled, the Commission will not hesitate to take legal action.
“Our information also shows that certain intermediaries have been openly selling advice and helping to put in place schemes and structures to circumvent VAT rules for their customers.
“Ultimately, these reports show that continued and sustained action is needed at EU level if we want to make sure that companies and high-worth individuals cannot continue to slip through the net without paying the taxes they rightfully owe.”
The EU is also scrutinising Malta, for its rules on superyachts that reduce the VAT rate applied to them on the grounds that they are used mostly in international waters.
HM Treasury, in response to Moscovici’s comments, said tax administration on the Isle of Man, which is self-governing but comes under British sovereignty, is the responsibility of the authorities there. The UK government also said on Monday that it was trying to get hold of the leaked papers, to look into any allegations.
“Tax administration on the Isle of Man is the responsibility of their own tax authorities. We are working closely with them to look into how VAT is paid on aircraft and yachts, and we intend to reply to the EU Commission by the end of the year,” said a Treasury spokesman.
According to Reuters, the Maltese Prime Minister, Joseph Muscat, said that Malta’s VAT rules had been approved years ago by the EU, and complied with the EU’s and the OECD’s regulations.
The Isle of Man government, the Tynwald, did not respond to a request for comment from Corporate Jet Investor today.