Steve Cain, Director at Equiom, reflects on the state of the sector and why the Isle of Man will prevail as a leading jurisdiction for yacht ownership and registration.
The Isle of Man as the hub of the superyacht world has its benefits not only for the wealthy who take advantage of our services, but also for the local residents who benefit from its valuable contribution to the Island’s economy. Isle of Man service providers consist of a range of technical experts in the various aspects of owning and operating a yacht, offering clients a wide range of corporate and financial services. We have local insurers, crew recruitment and crew employment companies. Our Ship Registry provides world-class registration services and our lawyers assist with the vessel purchase and any financial aspects required.
The Isle of Man’s prestigious status has not been without its challenges however, and there are a number of considerations that could potentially bring this status under threat.
There is no EU VAT and Customs harmony and each country applies different measures to attract yacht owners. Even Spain, after decades of driving yacht owners away from its shores, has opened its doors with a ‘new’ interpretation of long-standing EU legislation. This means that, at any given time, competing jurisdictions may introduce measures that give them the advantage.
Closer to home, the UK is free to introduce restrictions on the sector that could impact on our competitiveness. This happened in 2012 when Her Majesty’s Revenue and Customs (HMRC) confirmed its requirement that VAT recovery is only allowed for goods purchased that physically arrive in the UK and/or Isle of Man. This has put a damper on the Isle of Man’s status as a VAT jurisdiction for yachts as it is commercially impractical for goods to be purchased, for example in Italy, and then be transported to the UK before onward supply to the yacht based in Croatia. Nearly all other EU Member States do not apply such requirements which gives them a clear advantage over the Isle of Man and UK for VAT registration.
Managing outside influences
In addition to the backlash the industry encountered in the wake of the ‘Paradise Papers’ leak, we are also dealing with further uncertainty over what may happen post-Brexit. With regard to competing jurisdictions, the market has historically been dominated by places like the British Virgin Islands (BVI), Cayman Islands and Marshall Islands. However, the UK Ship Registry could equally become a rival for this business when it leaves the EU.
With all of these challenges come opportunities and I believe the Isle of Man is in a great position to maintain its status as a leading jurisdiction for yacht registration. Here’s why:
With Brexit comes opportunities
Despite its challenges, it is clear that Brexit creates an exciting new era for yachting in the Isle of Man. Certain VAT relief measures that are in place could serve to benefit us when the UK leaves the EU. For example, a privately registered yacht with a non-EU owner can be imported into the EU under the Temporary Admission regime in Europe, allowing 18 months of operation in EU waters without having to pay VAT. It’s a process which can be renewed every 18 months up to a maximum period of 10 years. This type of relief will be a clear advantage if it continues post-Brexit.
The Isle of Man Ship Registry is second to none
The quality of service from the Isle of Man Ship Registry remains unrivalled which has led to it being voted the Best Shipping Registry 2019 by World Commerce Review. This review takes into account product innovation, ongoing customer support and best practice criteria, as well as a continuing commitment to deploying the best possible solutions for the benefit of their clients.
An excellent choice of Flag
The choice of flag state should be considered one of the most important decisions in yacht ownership. The benefits of registering a vessel under a recognised quality flag state are clear. It will affect the regulations the owner and vessel are subject to including construction, inspection, regulatory compliance regimes and, of course, taxation and liability protections.
The Isle of Man Flag is part of the Red Ensign Group which uses the UK’s Maritime & Coastguard Agency (MCA) regulations for construction, safety and employment, which has a positive impact on maritime security for the yacht, owners, guests and crew. In addition, it protects the ethical welfare of mariners, the marine environment and resale value of the vessel, due to the ensured high standards of maintenance and quality.
There is a fantastic story to be told, but it has to start on our own door step and it needs our Island community to believe and support what is being done and then convey the message to the rest of the world. Structuring the ownership and registration of yachts on the Isle of Man is a story of high standards, increased safety, crew welfare, and a positive impact on the hardworking people based on the Island.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.