Why you should consider the Isle of Man for commercial property structuring

Many business owners, wealth creators and entrepreneurs are now paying even more attention to their wealth structuring arrangements and in particular, their choice of wealth structuring jurisdiction.

The Isle of Man as a Jurisdiction

The Isle of Man has been a leading international finance centre for decades. Situated in the Irish Sea between England and Ireland, the Isle of Man is a self-governing British Crown Dependency and is part of the British Commonwealth.

The Island is home to the oldest continuous parliament in the world, the High Court of Tynwald, of Norse origin and over 1,000 years old. With a long history of political and economic stability, the Island is free to enact its own laws, direct taxation rates and drives a bespoke fiscal and economic agenda, separate to those of the United Kingdom.

In May 2021 the Island was again rated Aa3 stable by Moody's and this is equivalent to the United Kingdom.

The Isle of Man has a long history of facilitating UK commercial property structuring via locally incorporated companies. Whilst the UK taxation landscape has changed significantly in recent times for commercial property as an asset class, there remain taxation and administration advantages to acquiring and holding commercial property via an Isle of Man company including.

Choice and flexibility on company type

The Isle of Man offers two primary types of company, one incorporated under the Companies Act 1931 which is very much aligned to English company law, the other under the Companies Act 2006 which is perhaps closer to some Caribbean jurisdiction incorporations.

There are differing levels of public registry filing and corporate governance requirements depending on the company type used.

Incorporation's can be with a single share and where the par value may be as low as one penny. Thin capitalisation rules do not apply.

UK Inheritance Tax protection

The taxation of UK situs real estate has changed considerably over recent years.

Whilst legislative changes effective from 2017 made residential property held by a non-UK resident company 'look through' for UK Inheritance Tax purposes, this is not the case with commercial property.

Structuring a UK commercial real estate acquisition via an Isle of Man company can still secure UK Inheritance Tax savings when compared to direct personal ownership and in the event of the untimely demise of the individual.

Value Added Tax (VAT)

The Isle of Man is treated as being part of the United Kingdom for customs, excise and VAT purposes under a reciprocal agreement.

VAT on the Island is currently at the rate of 20% and the model is broadly aligned with that in the UK.

A key differentiator though is that the Isle of Man's VAT regime is administered and overseen by the Isle of Man Government's Customs and Excise division as opposed to HM Revenue and Customs.

Where a VAT registration is desirable so as to reclaim input VAT incurred or to facilitate the transfer of a going concern, dealing with a smaller and locally based Customs and Excise division can often bring about timing, administrative and cash flow efficiencies.

Finance for the acquisition

Many commercial property transactions involve bank or other finance means.

The Isle of Man has insolvency and creditor protection legislation that allows for a lender to enforce their security should the need arise.

This can be viewed favourably by banks and finance houses in terms of their general willingness to consider lending to an Isle of Man incorporated company.

There are differing legal charge and security filing requirements for public domain review at the Isle of Man Companies Registry depending on whether a 1931 or 2006 Act company is selected.

Corporate services

The incorporation and enduring administration of a corporate structure when coupled with the acquisition, rental and disposal of commercial property can be both complex and time consuming.

Abacus Trust Group services include company incorporation, administration, provision of Officers, provision of Registered Office/Agent, accounting & bookkeeping and tax filing and compliance.

Corporate services provided from the Isle of Man amount to regulated financial services activity. The Isle of Man Financial Services Authority, an independent statutory Board that has been created by the Isle of Man Government, is tasked with overseeing the industry.

Abacus Trust Group is ideally positioned to advise and support with devising, implementing and administering a commercial property investment strategy.

Abacus is headquartered on the Isle of Man with further international offices located in Monaco, London and Malta.

Find out more

To learn more about the benefits of using an Isle of Man company for UK commercial property structuring, please contact Abacus Client Director - Isle of Man office, Paul Howland at paul.howland@abacustrustgroup.com or call + 44 1624 689610.