Fact File - Guide to the Isle of Man

Fact File - Your Guide to the Isle of Man

Where is it?

It is located in the centre of the British Isles, in the Irish Sea. The Isle of Man is 33 miles (52 kilometres) long and 13 miles (22 kilometres) wide.

Is it politically stable?

Yes. Tynwald is the world’s oldest continuous parliament and it celebrated its millennium in 1979. It consists of the House of Keys, whose 24 Members (MHKs) are directly elected by the people, and the Legislative Council which has eight members (MLCs) elected by the House of Keys and three ex officio members. Tynwald is the only parliament in the world which has three active chambers: Tynwald Court and its branches the House of Keys and the Council Chambers.

What is the relationship to the UK and European Union?

The Island is a self-governing crown dependency. The UK takes responsibility for the Island’s international relations and defence. The Isle of Man is not part of the European Union but has chosen to comply with the EU withholding tax directive, whereby EU resident clients banking with IOM institutions can elect to have EU withholding tax automatically deducted at source from interest earned on savings at a current rate of 20% rising to 35% in July 2011, or opt for disclosure of interest payments and not have the withholding tax applied. However, these options will be removed on 1 July 2011 when the Isle of Man moves to automatic exchange of information, which means details of your identity, residence and interest paid will be sent to the Manx tax authority for forwarding to the tax authority of the relevant EU country.

Does the Isle of Man have any compensation schemes?

Yes. There is one for depositors and one for investors. The Depositor Compensation Scheme (DCS) is for people who have money in current and deposit accounts in the Isle of Man. The scheme covers individual depositors up to £50,000, so joint depositors will be covered up to £100,000. Companies and trusts are covered by the scheme up to a maximum of £20,000. The Isle of Man’s DCS covers depositors irrespective of which country they live in or are incorporated in.

There is also a compensation scheme for investors in authorised collective investment. This is called the Authorised Collective Investment Schemes’ Compensation Scheme ("ACISCS"). Compensation may be due to you if a manager or trustee of an authorised collective investment scheme fails to repay you when required by the terms of the scheme. Compensation payable is as follows : 100% of the first £ 30,000 90% of the next £ 20,000 with a maximum compensation of £48,000.

Be aware, however, that compensation schemes will generally only cover direct deposits or investments. So depositors who have money via a bond will be treated as companies, i.e. it is the company managing the bond that has to claim. 

Will my savings and investments be tax free?

Like many offshore financial centres, the Isle of Man benefits from a low tax regime. There is no capital gains tax, wealth tax, stamp duty, death duty or inheritance tax, all of which allows your savings to grow on the island without the deduction of taxes. This doesn’t mean you are exempt from paying tax on your savings and investments in your current country of residence, it simply means there are no Isle of Man taxes applicable. For example, if you are an expat in a European Union country, you have to comply with the European Union Savings Directive (EUSD). So if you have savings in the Isle of Man and reside in an EU country you will currently be given the option to have the withholding tax automatically deducted at source from interest earned on savings at a current rate of 20% rising to 35% in July 2011, or opt for disclosure of interest payments and not have the withholding tax applied. However, as from 1 July 2011, these options will be removed as the Isle of Man will be moving to automatic exchange of information, which is where details of your identity, residence and interest paid will be sent to the Manx tax authority for forwarding to the tax authority of the relevant EU country. In addition, taxes such as death duties or inheritance taxes may well be bound by your domicile, rather than residence.

Does the Isle of Man have any tax agreements with other countries?

Yes. A list of all the Isle of Man international tax agreements can be seen here.

What range of financial services are on offer to expats?

The Isle of Man is a well established financial centre and offers the full range of financial services from simple deposit taking services to wealth management. There are also personal banking and investment services, offshore trusts, pensions and associated fiduciary services such as accountants and lawyers.

What providers operate from the Isle of Man?

You will find that many of the UK high street banks and financial institutions have a base in the Isle of Man, as well as global operations such as HSBC, Santander, Zurich Bank and Standard Bank. Well known UK names include Axa, Barclays, Lloyds TSB, Bradford & Bingley, Alliance & Leicester and Royal Skandia. All providers regulated to do business from the Isle of Man can be found on the IOM Finance website. If you want to check on whether a specific provider is regulated you can do so via the Isle of Man register here.

Do I need to be an expat from a particular part of the world to use the Isle of Man?

No. The Isle of Man offers its services to expats all over the world. However, due to its proximity to the UK it is a popular with British expats.

Why should I use the Isle of Man?

For expats juggling with at least two tax regimes initially, possibly more if you have to move for employment purposes, placing your savings and investments in a reputable offshore centre not only gives you the potential to grow your savings in a largely tax free environment, it also gives you the flexibility of having all your savings and investments in one place. For many expats this is a much better option than having lots of little savings and pension pots in different countries suffering a wide variety of different tax regimes and potential access problems.

Anything else I need to know?

In 2008 Kaupthing Singer & Friedlander (IOM) collapsed following the demise of its Icelandic parent. After several attempts to salvage the failed situation, the Isle of Man’s Depositor Compensation Scheme was triggered in order to pay depositors. To date over 95% of qualifying depositors have been paid compensation up to a maximum of £50,000 per individual. The IOM Financial Services Commission (FSC) is still working towards retrieving deposits over and above the £50,000 compensation limit. In terms of depositor protection going forward, the Isle of Man has proved its scheme can work, so much so that both Jersey and Guernsey have now introduced similar schemes.

• List of Useful Contacts →