Isle of Man: The Manx Budget Briefing Note – 2000

Last Updated: 17 February 2000

OVERVIEW

The Treasury Minister, Richard Corkill, presented his fourth Budget Speech to Tynwald this morning. "The Isle of Man is doing well" was his upbeat introduction and he went on to substantiate this statement by providing detail on the buoyant state of Government revenues. Gross receipts are anticipated at £335m in the current year, a massive £49m, or 17%, increase on last year.

Whilst clearly delighted with these numbers, he indicated he was fortunate to be Treasury Minister at a time when the Island's economy was so healthy. He introduced a note of caution in that "nothing stands still" and that change must be embraced. Interestingly, whilst referring to the usual external factors - the UK, the EU and the OECD - he firmly pledged that the Island will not compromise on two areas, firstly the Island's autonomy, and secondly its economic interest. The Treasury would not cause the Island to adopt change to its tax system which put it out of line with comparable jurisdictions.

The strategic review of the financial sector, announced in last year's Budget, was referred to. It's brief is to cover the medium term and, at the moment, is focusing on three areas. Firstly, the Funds sector is being considered in association with the FSC to maintain its competitive position. A product of this review is the recently launched Experienced Investor Fund which is expected to attract US$1 billion in the first five months. Secondly, the opportunities presented by the e-commerce revolution are being given appropriate consideration particularly for the Banking, Insurance and Funds sectors. Finally, an initiative to attract more foreign banks to the Island by active, but selective, direct marketing is being implemented.

On the overall economy, as mentioned, Government receipts are exceeding expectations although this is due in part to what were described as "volatile" receipts which are not expected to recur. Government spending is in line with previous estimates at £291m, creating a surplus for the current year of £44m which will be used to strengthen considerably Government reserves. Next year's Budget plans for a surplus of £15m.

On taxation matters, the Treasury Minister has clearly targeted low income families as the main beneficiaries of the current good state of affairs. The standard rate of tax for both individuals and companies has been reduced to 14% and personal allowances increased by inflation. Child benefit will be increased by £3.50 per child per week over indexation from April 2000, however it will also be brought into the charge for tax. The detailed changes to taxation are set below.

The management of the economy continues to adopt a conservative and cautious approach. Even though Government Revenues are so buoyant, the predicted surplus is heading for Reserves to meet the stated aim of having 50% of annual spending there. The lowering of the standard rate of tax to 14% continues the policy of tax cuts, started for companies last year.

DETAIL

A further reduction to the rate of taxation paid by trading companies and a fall in the standard rate of income tax payable by individuals were announced this morning. The study of how we can move from a prior year basis to a current year basis of taxation continues with the publication of a consultative document in April.

  1. New 14% band for trading companies
  2. In the tax year 1999/00 trading companies carrying on the whole of their activities within the Isle of Man were taxed at 15% on the first £100,000 of taxable profits and at 20% on profits above £100,000.

    With effect from 6 April 2000, Isle of Man trading companies will be taxed at a reduced rate of 14% on the first £125,000 of taxable profits and at 20% on the remainder.

    The revised rate will, when combined with the increase in the lower rate banding, provide a tax saving of up to £2,500 p.a. for Isle of Man trading companies.

  3. Income tax rates, allowances and thresholds
  4. The standard rate of income tax payable by individuals has fallen from 15% to 14% with effect from 6 April 2000. This is accompanied by a below-inflation increase in the threshold up to which the standard rate applies, from £9,900 per person in 1999/00 to £10,000 per person in 2000/01. The higher rate of 20% remains.

    Personal allowances have risen by 2.5% including additional allowances available for single parents and blind or disabled persons. Further details can be found overleaf.

    The level at which relief may be obtained for payments made under Educational Deeds of Covenant or for donations made to charities has increased by £500 to £5,000 p.a. for payments or donations made with effect from 6 April 2000.

  5. Non-resident company duty ("NRCD")
  6. NRCD will increase from £775 p.a. to £800 p.a. with effect from 1 June 2000.

    There is no increase in the current year of fees payable by Exempt Companies, International Business Companies or International Limited Partnerships established in the Isle of Man. However, an inflationary increase in the annual fees of each of the above can be expected from 6 April 2001.

  7. Family taxation matters
  1. With effect from 6 April 2000 Child Benefit payments received or accrued for the tax year 2000/01 will be treated as taxable income in the hands of the recipient.
  2. This measure will largely be offset by an increase in the amount of Child Benefit payable with an increase of £3.50 plus inflation available per child per week.

  3. Following the implementation of a system of tax credits for single parents in the UK, the Treasury Minister announced that such a system is still under consideration in the Isle of Man although it will not be introduced at present.
  1. Actual Year Basis of Assessment
  2. In line with Treasury policy to simplify the Income Tax system, a report is currently being finalised outlining the impact of a move to a current year basis of taxation for all income, as opposed to the prior year basis in use at present. This report is expected to be published in April 2000.

A consultation document regarding the implementation of the move to a current year basis of taxation is expected to be issued shortly.

TAX RATES, ALLOWANCES AND FEES

Rates

2000/2001

1999/2000

Companies (14% on first £125,000 of profit)

14%/20%

15%/20%

Non-residents

20%

20%

Individuals:

   

Standard rate band - single

£10,000

£9,900

- married

£20,000

£19,800

Standard rate

14%

15%

Higher rate

20%

20%

     

Allowances

   

Single person

£7,535

£7,350

Married couple (transferable between spouses)

£15,070

£14,700

Blind person's relief/Severely disabled person's allowance

£2,070

£2,020

Single parent (in receipt of one parent benefit)

£5,160

£5,035

     

Fees

   

Exempt Companies

£400

£400

International Business Companies

£1,200

£1,200

Exempt Insurance Companies

£2,500

£2,500

Non-resident Company Duty (from 1.6.00)

£800

£775

NATIONAL INSURANCE CONTRIBUTIONS

Year ended 5 April 2001

Class 1

Weekly Pay

Employees' contributions

Employers' contributions

From

To

   

0

76.00

Nil

Nil

76.01

84.00

10% on excess over £76

Nil

84.01

535.00

10% on excess over £76

12.2% on excess over £84

535.01

+

No further contributions payable

12.2% on excess over £84

Class 2

Weekly rate: £6.55 (small earnings exemption: £3,825)

Class 3

Weekly rate: £6.55

Class 4

7% on profits between £4,385 and £27,820.

NOTES

  1. Reduced rates of Class 1 contributions, for both employers and employees, are applicable in respect of contracted out employees on earnings between £76 and £535 per week in 2000/2001.
  2. The Class 4 (earnings related) contributions are allowable as a deduction from the individual's total income for income tax purposes.

For any further information on the Budget or any matters relating to taxation please telephone Nicholas Williamson or Kevin Cowley.

This note has been produced as a briefing paper on the 2000 Manx Budget. It is written in general terms and should not therefore be relied upon in isolation. Professional advice should always be sought in making decisions in respect of taxation matters.

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