Top considerations for this year’s Isle of Man tax return

Updated: July 2023

Following the end of the Isle of Man tax year and ahead of the tax filing deadline, Amanda Reid from Equiom Tax Services outlines some of the key matters that you should consider when preparing and completing your Isle of Man personal tax return.

As someone who has more than a decade of experience in preparing and dealing with tax returns for local residents, it is not always a smooth process. Here are some of the more important facts and tips about reporting income to help you prepare your Isle of Man personal tax return ahead of the 6 October deadline. 

Consider the scope of the tax return

Isle of Man resident taxpayers must include their total worldwide income on their Isle of Man tax return, whereas non-residents should only include any relevant Isle of Man source income on their Isle of Man non-resident tax return.

There is no need to include any capital gains in the absence of capital gains tax in the Isle of Man.

Check your tax return carefully

Failure to declare all income correctly may result in interest and penalty charges when any omissions become known to the Isle of Man Income Tax Division. You should carefully consider whether you have included all relevant income sources.

If you are unsure whether  any amounts received during the year are taxable as income, we would recommend that you notify it as a ‘white space disclosure’ in the additional information box in the income tax return.  The Income Tax Division will not tax it unless they believe that it should be classed as income.

Be careful to include all relevant income

Under the terms of the exchange of information agreements currently in place (including Tax Information Exchange Agreements (TIAEs), Common Reporting Standards (CRS) and Foreign Accounting Tax Compliance Act (FATCA)), the Isle of Man Government receives a raft of information regarding income received by Isle of Man taxpayers from Isle of Man entities and many other countries, including the UK, Jersey, Guernsey, Ireland, the USA and much of Europe. These details are cross referenced to individual records to identify any omissions so that the Isle of Man Income Tax Division can open targeted enquiries.

Any changes?

A change in circumstances, such as your departure from the island, marriage, or your partner’s death, for example, must be notified to the Isle of Man Income Tax Division and may require submission of a tax return within six months of the date of the trigger event. 

Be aware of the different tax treatments compared to the UK

Income arising on UK tax-efficient investment products such as Individual Savings Accounts (ISAs), while not liable to tax in the UK, are subject to income tax in the Isle of Man.

There is also a risk that tax-free lump sums received from UK pension schemes may not automatically be tax-free in the Isle of Man, given that UK schemes do not tend to have Isle of Man tax approval. We would recommend that advice is taken, and any amounts received are cleared with the Isle of Man Income Tax Division.

Provide full details if self-employed or renting a property

Full details of income and expenditure arising from self-employment or rental properties (overseas and Isle of Man) must be included in your Isle of Man tax return, even where the net result may be a loss or foreign tax has been suffered.

Any income from an Estate that you need to consider?

Income (but not capital) arising during the administration of an estate and received as part of a legacy must be declared in full on your tax return. 

Any foreign source income?

An Isle of Man resident who is in receipt of income from the UK, such as a pension, may find that UK income tax is deducted at source. There is a process for ensuring that these amounts are received gross, and if it is not in place, it could result in the income being taxed in both the UK and the Isle of Man. 

Consider if any tax reliefs are available: 

• Interest paid: Tax relief may be available to Isle of Man resident taxpayers for mortgage or loan interest paid to an Isle of Man lender.
• Nursing expenses: Tax relief may be available for nursing expenses paid by you in respect of yourself or a close relative.  
• Charitable donations: Charitable donations in excess of £100 per charity in a tax year (i.e. the donation to each charity must be over £100 in order to qualify), or donations made via a charitable deed of covenant, may give rise to tax relief.

UK land and property assets

Isle of Man residents that own UK land and property, either personally or through an Isle of Man company or structure, should ensure they are aware of any UK tax filing obligations. We would recommend that advice is sought in relation to any UK land and property holding because the issues are complex.  

Our team of experts in Equiom Tax Services have a range of knowledge and experience covering Isle of Man and UK tax. For more information or to discuss any concerns related to your Isle of Man tax return or any other tax matters, contact Amanda Reid. 

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.