UK Budget – double edged sword for IoM

The UK is going ‘head to head’ with the Isle of Man and other jurisdictions with the reforms announced in last week’s summer budget, iomtoday reports.

That’s the verdict of Treasury Minister Eddie Teare, who says that changes to the UK’s corporation tax, inheritance tax and reformed non-domicile rules will affect the island’s financial industry and could make it harder for the island to attract entrepeneurs.

“It will have an impact on us one way or another,” he told iomtoday. “What has come out of this is that the UK is gearing up to be a very strong competitor.

“They already have the lowest rate of corporate tax in the OECD. If they’re going to reduce it even further it means they’re going into head to head competition with us.”

Meanwhile the island’s fiduciary companies and corporate service providers will feel the effects of changes to the UK non-domicile rules, which will limit the amount of time they can stay in the UK before they are considered to be residents for tax purposes.

“There are quite a few Isle of Man companies that hold assets on behalf of non-doms based in the UK,” Mr Teare said. “It may mean that non-doms will have to modify their arrangements.”

But the new rules could also attract non-doms seeking to leave the UK, he continued.

“Some non-doms may move out of the UK and decide they’d like to move to the Isle of Man, where they can take advantage of our tax cap.”

Mr Teare added that the fact that the island has no inheritance tax is still a key part of the package, despite a significant increase to the UK’s inheritance tax threshold.

“People can come to the Isle of Man, where they know they will pay taxes for as long as they live, but they also know that once they pass away there will be no further claims on their estate,” he said.

He praised UK chancellor George Osborne’s political talents. “He’s produced a very skilful budget, it’s very well done,” he said. “But it may be a double-edged sword for us. It might benefit one part of the economy but have an adverse impact on another.”