Isle of Man: Law of Offshore
The Isle of Man law of trusts is based on English law and is to be found in the following acts:
- Trustee Act 1961
- Variation of Trusts Act 1961
- Perpetuities and Accumulations Act 1968 (adoption of the Hague Convention)
- Recognition of Trusts Act 1988
- Trusts Act 1995
- Purpose Trusts Act 1996
In addition, being a common law jurisdiction, there is a considerable amount of case law (mainly English) which is persuasive authority for the Manx courts. The distinctions between English law and Manx trust law arise principally from the fact that the Isle of Man has not adopted certain provisions of English trust law, for example, those relating to restrictions on accumulation of income.
Appeal from the Isle of Man courts is to the Privy Council in London.
Trusts do not need to be registered unless they involve real estate on the island, when settlements inter vivos must be registered. However, Unit Trusts (Collective Investment Schemes) are subject to various special requirements under the Financial Supervision Act 1988 (since consolidated into the Financial Services Act 2008). There is no stamp duty.
There are no statutory accounting or auditing requirements and there is no need to file tax returns. It is possible to obtain an advance clearance from the relevant registry based on a draft trust deed so that the identity of the settlor and the beneficiaries can be kept totally confidential.
The maximum perpetuity for Manx trusts is 80 years if established prior to 2001. Trusts established after 2000 have a statutory perpetuity of 150 years. There are no provisions for non-recognition of foreign judgements; asset protection trusts are not available.
Recent legislation in the form of the Trusts Act 1995 has secured the position of trusts established in the Isle of Man in the face of challenges in the applicable governing law by other jurisdictions, particularly in the area of 'forced heirship'.
Until 2005, trustees were not licensed or supervised by the Financial Supervision Commission, unless the fiduciary carried on business in investment, banking or insurance, in which case licences were required under those headings.
The Fiduciary Services Act, 2005, extended the Corporate Service Providers Act 2000 to require persons who, by way of business, provide certain services to trusts and partnerships or act as nominee holders of units in unit trusts, to hold a fiduciary licence.
The licensing of fiduciaries brought the Isle of Man into line with similar arrangements already established in other offshore jurisdictions such as Bermuda, Guernsey and Jersey and an external review of the proposals by London law firm Stikeman Elliot found the bill compares favourably with legislation in these places.
Alongside the Fiduciary Services Act, the Isle of Man Financial Supervision Commission updated its Fiduciary Services Regulatory Codes.
The Fiduciary Services Acts 2001 and 2005 were consolidated into the Financial Services Act 2008, which sought to simplify the licensing regime for the Isle of Man's financial services providers.
As in other jurisdictions whose trust law follows the English pattern, a beneficiary of the trust may apply to the court to stop a trustee from dealing with trust assets in an unauthorised manner. Loss as a result of an authorised conduct will result in the trustee being responsible for making the loss good. The asset value of the trustee is therefore an important consideration.
Where a breach of trust is committed by a corporate trustee, every person who at the time of breach was a director of the trustee may be deemed, in certain circumstances, to be guarantor of the trustee (ie personally liable) in respect of damages awarded by the court. Principles of constructive trusteeship also apply.
For the taxation of trusts in the Isle of Man see Offshore Tax Regimes.