Isle of Man VAT system

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This brief article provides an overview of the Isle of Man VAT system.


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 £83,000 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.
 

You must register if-

  • at the end of any month, the total value of your taxable supplies you have made in the preceding 12 months (on a rolling 12-month basis) exceeds £83,000 or
  • at any time you expect that the value of your taxable supplies in the following 30 days will be more than £83,000
  • If you are liable to, or you require to, be registered for VAT in the Isle of Man the forms listed below must be completed (where applicable).
  • If you have bought a business as a going concern you may be able to keep the last owner's registration number

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.


Deregistration Threshold


The deregistration threshold is £81,000. If your VAT taxable turnover for the year is less than or equal to £81,000, or if you expect it to fall to £81,000 or less in the next 12 months you may seek deregistration.

 

VAT Rates


The standard rate of VAT is 20% and applies to 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 than the date by which the return is due.

Since April 2010 all newly registered businesses and existing businesses with a turnover of £100,000 or more have been legally required to submit their VAT Returns online and pay electronically.

Since April 2012 all remaining VAT-registered businesses have been legally required to submit their VAT Returns online, meaning that all VAT- registered businesses, apart from a very small number that are exempted, are now required to submit their VAT Returns online.

Isle of Man traders, registered for VAT in the Isle of Man do not have to submit their VAT returns online at present. This facility is available online if requested.


Penalties


If a VAT return is submitted and is later found to contain errors, the penalty rate for an inaccurate VAT Return depends on why you made the error. The more serious the reason, the greater the penalty can be. The penalty is calculated as a percentage of the tax unpaid, understated, over claimed or under-assessed, as a result of the errors.
Penalties will be charged for:

  • Careless
  • Deliberate, or
  • Deliberate and concealed.

Late Registration Penalty:


The penalty is worked out as a percentage of the VAT due (output tax less input tax), from the date when you should have registered to the date when the authorities received your notification, or became fully aware that you were required to be registered. The rate of penalty depends on how late you were in registering.

 

If you have any queries or would like to discuss your tax situation please contact:

 

Dennis McGurgan


This article has been prepared from the Isle of Man Governments announcements, guidance and legislation and could be subject to revision. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Grant Thornton Limited, its directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

 

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