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IoM Budget Includes Plan For Bank Tax

Amanda Banks, Tax-News.com, London

22 February, 2018

The Isle of Man's 2018 Budget maintains the zero percent company tax rate, and announces a banking tax review, which will look at taxing all banking profits at the 10 percent rate from next year.

To address aggressive tax planning by individuals, new legislation will be implemented to stop certain practices enabling some individuals to receive tax-free payments via the sale of goodwill or unquoted shares to their own companies, in preference to taxable ones such as dividends.

The island's Assessor has been given the Government's full support in using her wide anti-avoidance powers against individuals who exploit their relationship with their companies and do not pay their "fair share of tax." The Assessor has been instructed to charge the 60 percent penalty in full.

The GBP400 reward businesses can pay to employees free of tax is to be increased to GBP600.

The soft drinks industry levy will be deferred for one year until April 2019.

Road fuel duty will be frozen for the seventh year and the basic rate of air passenger duty is to remain unchanged at GBP13 (USD18) for 2018/19.

The statutory income tax cap, which limits the amount of income tax payable by resident individuals, will rise by GBP25,000 to GBP150,000 per annum.

The tax-free personal allowance for a single person rises to GBP13,250, an increase of GBP750, meaning a jointly assessed married couple or civil partners can earn GBP26,500 before they pay income tax.

The annual contributions limit for all pension schemes is to be reduced to GBP50,000.

Further, the Government will legislate to allow pension funds of up to GBP142,000 to be paid out in full, and a new pension scheme will allow full access after age 55 and transfers from current approved schemes for a 10 percent fee. The new scheme will allow full tax relief on contributions and will be taxed at the usual rate but have a large tax-free lump sum of 40 percent.

As previously announced, the abolition of Class 2 national insurance contributions has been put back until April 2019. This means Class 2 self-employed contributions are payable for the whole of the 2018/19 tax year and will be collected in the normal way.

National insurance paid by employees, employers, and the self-employed for the 2018/19 tax year is frozen so that the island continues to remain a competitive place to do business.

The Lower Earnings Limit, which is the point at which an employee starts to build up entitlement to national insurance funded benefits, rises by GBP3 from April 6, 2018, to GBP116 per week, in line with the threshold in the UK.

Class 3 voluntary national insurance contributions increase from GBP14.25 to GBP14.65 in line with the increase announced in the UK.

New state pension proposals will be brought forward next month and the Government will press ahead with plans to end contracting out from April 6, 2019. The UK abolished contracting out from April 6, 2016.

The Government says it is on track to deliver a new single-tier Manx state pension in April 2019. An order will be brought to next month's parliamentary sitting, which will bring the new Manx pension into law.

The Government has confirmed it intends to keep the island within the UK customs union post-Brexit.

Last year's benefit in kind exemption for bicycles used to cycle to work is extended to include electric bicycles, and allowable payments qualifying for relief as nursing expenses will now include physiotherapy costs. The maximum relief available for nursing expenses remains GBP12,500 at the 10 percent rate.

TAGS: individuals | Isle of Man | compliance | Insurance | tax | business | tax compliance | tax avoidance | tax incentives | law | banking | employees | retirement | international financial centres (IFC) | corporation tax | tax thresholds | offshore | legislation | tax planning | tax rates | social security | tax breaks | dividends | individual income tax | Tax | Tax Evasion |

 

 

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