The offshore centre has responded to claims of aircraft-linked avoidance of VAT.

The Isle of Man’s government has asked the UK Treasury to assess how business jets are imported into the European Union via the offshore financial centre amid controversy about “abusive” avoidance of value added tax.

The IoM’s government said it asked the UK to asset the jet importation business with a focus on how aircraft leasing arrangements are treated for VAT. 

The Consortium of Investigative Journalists, a Washington DC-based group known, for example, for its massive “Panama Papers” leak last year, has claimed there have been issues of VAT avoidance; the claims have prompted HM Treasury’s assessment, the IoM government said in a statement. 

Since 2011 corporate jets over 800 kg were zero-rated for VAT, with over 30 assessments for under-declared or over-claimed VAT against businesses in the aircraft leasing sector - protecting approximately £4.7million of VAT. (Source: ITN.)

“The VAT treatment of the importation of aircraft into the EU is a highly technical and complex area in which the Isle of Man follows the same policy, laws and rules as the United Kingdom. The Isle of Man Government works closely with HMRC and holds quarterly governance meetings on a range of VAT issues. In light of the claims made by the ICIJ, we have asked HM Treasury to look at all elements involved in the process of the importation of business jets via the Isle of Man into the EU,” Howard Quayle, chief minister in the IoM, said.

“Like all responsible members of the global community, we take allegations of this nature extremely seriously. The ICIJ has so far rejected our repeated requests to provide written evidence to support their claims. During the course of our own ongoing review, we have found no evidence of wrongdoing or reason to believe that our Customs and Excise has been involved in the mistaken refunding of VAT,” he said. 

HM Treasury will set out the scope of its investigation in November, with work due to be complete in 2018. 

The Isle of Man Treasury’s Customs & Excise Division is already conducting a review of VAT registered businesses in the aircraft import and leasing sector. That review started in October 2016 and is aimed at testing the accuracy and efficacy of declarations made to it by those businesses.

From aroundy 262 live VAT registrations in the sector, the island’s Customs and Excise has conducted 33 audits to date and a further 13 audits are currently under way.