Isle of Man: International Tax and Business Guide 1999 - The Tax System - 16.Value Added Tax

Last Updated: 6 September 1999


Value added tax (VAT) is chargeable on any supply of goods or services made in the Isle of Man by a taxable person in the course or furtherance of any business and on imports of goods and some specified types of services. A taxable person is a person that is or ought to be registered with Customs and Excise, which administers the tax. Registration is mandatory if the value of supplies made exceeded £51,000 in the previous twelve months or is expected to exceed £51,000 in the next 30 days. Businesses with lower turnovers may ask for voluntary registration.

Goods are supplied at the time at which they are made available to the purchaser, and it is the location of the goods at that time that determines where they are supplied and, therefore, whether VAT is chargeable in the Isle of Man. Services are generally treated as being supplied where the supplier belongs. A business normally belongs in the country in which it has its business establishment or some other fixed establishment.

The value on which VAT is chargeable is generally the price agreed upon, but if the contract does not provide for VAT to be charged in addition, the supplier must account for VAT out of the sales price.


VAT charged to a business on its expenditure is called input tax, and VAT charged by it on the supplies it makes is output tax. Full credit is available for input tax except to the extent that it relates to:

  • Expenditure not incurred for the purpose of the business.
  • Expenditure directly or indirectly attributable to exempt supplies (see 16.04).
  • Expenditure with respect to which a credit is specifically prohibited, such as that incurred on automobiles (generally), domestic accommodation for company directors, and entertainment (except of staff).

The formula used to determine the proportion of input tax attributable respectively to exempt supplies and to taxable supplies must be acceptable to Customs and Excise. In the case of land and buildings costing more than £250,000 and certain items of computer equipment costing more than £50,000, the initial credit for the input tax may be subject to adjustment over a review period if the extent to which the asset is used in making taxable as opposed to exempt supplies varies during this period.

If a VAT return shows that the VAT on expenditure exceeds the VAT on supplies made, a refund of the excess is made, although Customs and Excise officers may visit the business to check the claim.

Returns normally are made quarterly, although monthly returns may be allowed if repayments are due, and annual returns may be allowed if turnover is low. The return, together with the tax due, must be received by Customs and Excise by the end of the month following the period covered by the return.

Very large VAT payers are required to make monthly payments of VAT on account even though their returns will still be quarterly. Penalties as well as interest may be charged if the return or the payment is late. If the return materially understates the taxpayer's VAT liability or materially overstates the taxpayer's entitlement to a VAT refund, a penalty of 15% of the error may be charged.

Documentary evidence supporting the figures in returns must be retained for six years. VAT invoices must be available to support a claim for input tax credits. The detail required on invoices varies depending on the type of business, but it always includes the consideration due, the VAT number of the supplier, and the date; it also generally includes the names and addresses of both the supplier and the customer, the VAT chargeable, and the nature of the supply.

If a dispute concerning the treatment of a transaction for VAT purposes cannot be settled by agreement between the taxpayer and Customs and Excise, an appeal may be made to an independent VAT tribunal.


There are two rates of tax: a standard rate of 17.5% and a lower rate of 0%. Supplies taxable at the rate of 0% are said to be zero-rated. Zero-rating is a form of exemption with credit for input tax incurred on related expenditure. In other words, although no VAT is chargeable on the sale, VAT on related inputs is recoverable. VAT of 5% is charged on domestic fuel including electricity and VAT of 5% is charged on tourist accommodation.

Unless a supply is zero-rated, exempt (see 16.04), or outside the scope of VAT, it is subject to VAT at the standard rate. The most common items outside the scope of VAT are supplies made by a person not carrying on a business (such as an employee), the transfer of a business as a going concern, and the receipt of dividends.



Zero-rating within the United Kingdom covers a range of supplies, including most food, books, most public transport, buildings constructed for domestic or charitable use, and children's clothing.

Exports of goods are zero-rated, but it is essential that adequate evidence is available to show that the goods have been exported outside the scope of VAT but with input tax recovery. Most international services rendered to overseas customers are now including specific types of services performed outside the Isle of Man; defined professional, financial, information, advertising, and intellectual property services supplied to persons belonging outside the EC and to businesses belonging in other EC member states; and services relating to land situated outside the Isle of Man. Services relating to real estate situated in the Isle of Man are always subject to VAT at the standard rate.


A business that only makes exempt supplies cannot register for VAT purposes or recover any input tax charged to it on its expenses. A business that supplies a mixture of exempt and taxable items may register, but it may only recover input tax on its purchases of goods and services to the extent that those goods and services are used in making taxable supplies. An apportionment of expenditure may be necessary, as described at 16.02.

Supplies of goods and services that are exempt from VAT include insurance, postal services supplied by the Post Office, most financial services, and education and health services. The grant or assignment of an interest in real estate is usually an exempt transaction. Certain transactions in commercial property, however, are subject to VAT at the standard rate, and the sale of new residential property is zero-rated. The owner of any interest in commercial property may elect to charge VAT on receipts from that interest, thus making it possible to recover VAT on any related expenditure. Once this election has been made, however, the owner must charge VAT on all future receipts, whether of rent or sales proceeds.


Non-residents that are not registered for VAT purposes in the Isle of Man and are therefore unable to recover VAT incurred on expenditure in accordance with the procedures described at 16.02 may nevertheless be entitled to a refund of VAT under a different set of rules, sometimes known as the mutual recovery procedure. To be eligible for a refund under this procedure, a non-resident must not make any supplies in the Isle of Man other than the international transport of freight. No refund is available for VAT incurred on entertainment expenditure or the purchase of an automobile.


From 1 January 1993, changes have taken place in the system of accounting for VAT on imports that have been in free circulation in other EU member states, and Isle of Man exporters will have to provide Customs and Excise with details of sales to commercial EU customers. The new rules will not affect the right of a business to recover VAT paid on imports, and an Isle of Man exporter will still be able to zero-rate sales of goods to business customers in other EU countries, provided that the exporter's VAT invoice quotes the customer's VAT number. Sales to private individuals in other EU countries, however, will no longer be zero-rated.

Special rules have been introduced to cover mail-order sales and sales of automobiles, boats, and aircraft to private individuals in other EU countries. Although the new rules would technically require traders to be registered in each member state in which they do business, a simplification procedure has been introduced for triangular transactions, ie where the goods are delivered straight to the end user with the invoice passing through an intermediate invoicing company.

The Isle of Man authorities will accept VAT registrations by these invoicing companies to allow the simplification measures to be applied providing the books and records of the company are maintained on the Island. Many other member states will not permit registration without a formal establishment.

The information given is not exhaustive and is based on conditions existing at 5 May 1999. Readers are advised to consult with professionals, such as independent accountants, legal counsel, and investment bankers, before taking any formal action. Deloitte & Touche would be pleased to discuss specific problems.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions