New agreement reached with UK over tax revenue

The Isle of Man Government has struck a new VAT deal with the UK.

Treasury Minister Eddie Teare MHK has this morning informed Tynwald that a new agreement has been reached involving a revision of the formula that governs the sharing of joint indirect tax revenues under the 1979 Customs & Excise Agreement.

When the UK revised its VAT-sharing agreement with the Isle of Man, the move led to an estimated reduction in income of £200m.

Mr Teare and the Financial Secretary to the Treasury of the United Kingdom David Gauke signed the new arrangements in London on March 2.

Minister Teare said: ‘The new formula, which is largely based around final expenditure by households, is intended to give the Isle of Man the revenue due to it from the consumption of goods and services in the island whether purchased on or off the island, including via the internet.’

A statement from government released at 11am said: ‘Both the Isle of Man and United Kingdom Governments recognise the good working relationship that has developed during the revenue sharing negotiations and believe that the new formula provides a stable and secure basis for the long term future of the Customs and Excise Agreement between the United Kingdom and the Isle of Man.’

‘A separate stand-alone document describing how the new Final Expenditure Revenue Sharing Arrangement (FERSA) will work in practice is to be produced by the Isle of Man Treasury, which once agreed with HM Treasury will be made public.’

Under the new deal, the island’s share of VAT will increase by £2.7m for 2013/14, £7m for 2014/15 and an extra £11.8m in the current year.