Isle of Man
Investment overview for the Isle of Man
The Isle of Man: The Business Case
Peter Beighton, of The ILS Group, makes the case for the Isle of Man
One of the keys to the Isle of Man’s continued success is the close working relationship between the private sector and the government. The government’s pro-business attitude and commitment to creating an environment that supports business has been fundamental to the growth of the island’s economy. Add to this cutting edge technology and communication infrastructures, competitive labour and operating costs, sophisticated professional and financial services, an attractive package of government incentives for inward investors and a standard rate of 0% per cent income tax for corporations since 2006 and you have one of the most attractive business environments in the world.
Political stability
The Isle of Man has sustained unbroken parliamentary rule for over one thousand years and is recognised as the oldest parliament in the world. The democratically elected government is responsible for internal affairs including all fiscal, social and taxation policy issues. It is an entirely separate legal jurisdiction with its own judiciary and laws: it does not form part of the United Kingdom. As a further endorsement of the Island’s economic and financial stability two of the world’s most respected credit rating agencies, S&P and Moody’s, have each awarded the Isle of Man AAA ratings.
Relationship with the United Kingdom
The Isle of Man is an internally self governing crown dependency. The UK Parliament does not legislate for the Island’s internal affairs; the UK government is responsible only for the defence, external affairs and the ultimate "good government" of the island. The Isle of Man government is consulted on any international convention, treaty or agreement that would affect the Island and its consent is also sought before the UK’s ratification of any such agreement is extended to cover the Isle of Man. In a move that is reflective of the island’s growing confidence on the world stage the Isle of Man is increasingly dealing state to state on international matters that directly affect it. For example, the Isle of Man is an active member of the OECD’s Global Forum and is represented at ministerial level at the summits of the British-Irish Council.
Relationship with the European Union
The Isle of Man has what is referred to as a special relationship with the European Union, as set out in Protocol 3 of the United Kingdom’s Treaty of Accession 1972. Pursuant to this special relationship the Island is neither a member state nor an associate member of the European Union. Under Protocol 3 the Isle of Man forms part of the customs territory of the EU. It follows that there is free movement of industrial and agricultural goods in trade between the Island and the EU itself. The island neither contributes to, nor receives from, the funds of the EU which guarantees the Isle of Man’s fiscal independence. Any proposal to change Protocol 3 would require the unanimous approval of all member states of the EU including, of course, the UK. Apart from the requirements of the Protocol, other EU rules do not apply.
Currency and exchange control rules
The Isle of Man is part of a currency union with the United Kingdom. It issues its own currency which is legal tender only within the Isle of Man, while UK currency also circulates freely. One Isle of Man pound is equivalent to one UK pound sterling. There are currently no exchange controls that apply to the movements of funds into or out of the island whether capital or income, nor is there any legislation in place whereby such controls may be imposed.
Regulation
Creating the right environment to allow the island to develop as a financial sector has been critical to the Isle of Man’s success. Government policy has resulted in the Island developing a reputation for being a premier jurisdiction in terms of regulation while retaining the delicate balance between providing a business friendly environment and meeting international standards of financial supervision.
A number of independent assessments of the island’s regulatory framework have been conducted. The most recent and comprehensive of these was carried out by the International Monetary Fund (IMF) and was completed in November 2003. There has also been the Edwards Report for the UK Home Office in 1998 and the assessment by the Financial Stability Forum of May 2000 which identified the island as a Category 1 jurisdiction.
Regulation on the Isle of Man is conducted by the Financial Supervision Commission for fiduciary, fund, investment and banking business. The Insurance and Pensions Authority deals with all insurance and pension regulated business. The island’s regulators maintain close contact with their counterparts in other jurisdictions. They also participate in a wide range of international groupings including both the Offshore Group of Banking Supervisors and the Offshore Group of Insurance Supervisors, the International Organisation of Security Commissions, the International Association of Insurance Supervisors and the International Organisation of Pension Supervisors.
IT infrastructure and telecommunications
It is widely acknowledged that a world class telecommunications infrastructure is a key element in attracting business to any jurisdiction. The Island has recently seen the introduction into the market of Cable & Wireless to compete with Manx Telecom, now part of the Telephonica group. The Isle of Man became the second country in the world to enable a 3G mobile phone service and benefited from Europe’s first super fast (HSDPA) 3G network. There is a wide range of internet service providers and a portfolio of quality hosting products and services. The island was one of the first in the world to offer broadband ADSL services to its citizens and currently provides these services to 98% of households and businesses on the island.
The telephony and internet services provided by the telecoms companies on the island are backed by highly resilient, self-healing fibre and microwave links between the Isle of Man, the UK and Ireland. The island has two self healing (SDH) rings with 1.2 terabits capacity of which only 0.02% is currently used. The Isle of Man’s high bandwidth connections to the UK and Ireland give the network enough capacity to handle the transatlantic internet traffic between Britain and the United States ten times over.
Labour and immigration
Work permits
The island is part of the common travel area with the UK and there are no special restrictions on access to the island other than those under the Immigration Act (which apply equally to United Kingdom). The ability of newcomers to take up work is governed by the Control of Employment Act which requires everyone who is not an ‘Isle of Man worker’ to have a permit before starting employment or self-employment in the island.
Qualification as an Isle of Man worker includes being born on the island, resident for at least five years, married to an Isle of Man worker, having received full-time education during residence (and having remained on the island afterwards) or having a Isle of Man born parent who spent the first five years of their life on the island. Broadly speaking permits are issued where there are no suitable local workers available for the job concerned and where there is no reason to doubt the good character of the person for whom the application is made. The permits themselves are issued for specific jobs with specific employers and can be limited in duration or remain indefinite.
Employment legislation
The island’s employment law is based on the English law framework and provides support for employers and employees in the employment relationship.
Commercial/residential accommodation
With a land mass of 227 square miles and residential population of around 80,000 people, the island has room for expansion, a luxury when compared with other offshore jurisdictions. It has an abundance of office and residential accommodation so that the potential for growth is unrestricted and costs remain extremely competitive.
This fact has ensured that the Isle of Man remains one of the least expensive of the developed offshore centres. It also means that new businesses have the option of establishing their physical presence in the island, as opposed to having to employ the services of third party contractors (although this remains an option in certain circumstances).
A key factor in the decision-making process for many leading commercial and financial organisations that have chosen the island as their offshore base is the ability to purchase their own office accommodation and bring in their own senior personnel to establish a new operation. The island has an open property market with no restrictions or qualifications limiting property acquisition whether residential or commercial.
Air and sea routes
Getting to the Isle of Man is simple; the island is served by three London airports, Gatwick, Luton and London City, with the journey being about an hour. Other major international airports with connections to the Isle of Man include Manchester, Birmingham, Glasgow and Dublin. Other airports in the British Isles with direct flight connections to the Island include Belfast, Newcastle, Leeds-Bradford, Edinburgh, Bristol, Southampton, Blackpool and Liverpool.
By sea there are daily sailings from Heysham, Liverpool, Dublin and Belfast. Services are operated by the Isle of Man Steam Packet Company which uses a mixture of conventional and fast craft vessels. The main United Kingdom freight port for the island is Heysham.
Financial assistance scheme
The Isle of Man introduced the Financial Assistance (Inward Investments) Assistance Scheme 2004 on August 1, 2004. For the first time in the Isle of Man this provides grants of up to 50% for setting up a new financial institution in the island. The package can include:
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50% grant on one off special start-up costs;
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50% grant on any staff or equipment relocation costs;
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50% grant on office rent for up to two years;
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50% grant on IT/telecoms and installation;
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50% grant on external training costs;
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50% on marketing costs.
Education
The Isle of Man ensures high standards throughout its educational system. Schools are well maintained and well resourced with generous pupil: teacher ratios. Such standards are evident in the excellent results achieved by students at GCSE level and the high numbers staying on into Years 13 and 14. Each of the island’s five secondary schools has a reputation of academic excellence with an array of impressive facilities. Additionally, the Isle of Man College provides a wide range of courses including A levels, applied GCEs, National Certificates, National Diplomas and NVQs. The Isle of Man government has supported the Isle of Man International Business School which offers a range of graduate courses and a Masters program including an MBA and an MSC in International Banking and Finance.
Independent education is available at King Williams College and the Buchan School. These schools merged in 1991 to provide continuous education for both boys and girls, accommodating day pupils and boarders from the age of 4 to 18. Pupils follow a wide range of extra curricular activities and almost all year 14 leavers proceed to higher education having followed courses in the International Baccalaureate.
Quality of life
Satisfaction with the island’s quality of life is unrivalled. According to a Mori survey 93% of residents are satisfied with the island as a place to live and are pleased with its government. The island’s beautiful countryside, suitability for family life and its high level of personal safety were all cited among its strengths.
The results of a Community Satisfaction Survey conducted for the Isle of Man Constabulary showed that 98% of respondents felt safe living on the island. With an area of 227 square miles the Isle of Man has a low population density of some 352 people per square mile. Compare this to Jersey (1,888 people per square mile) and Malta (3,562 people per square mile) and the Island’s peace and tranquillity become obvious.
The Isle of Man has a temperate climate. Rainfall on the island can vary quite a lot depending on the location. There is less rainfall in the north of the island along the northern plain and in the south along the southern coast. Rainfall is abundant in the hilly interior of the island. The island rarely experiences frost or snow. Summers are cool with clear skies: winters are mild and wet. The island does not suffer with overcast skies as much as other places in the British Isles - strong winds which whip through the island keep the clouds moving.
Despite its low tax rates, the island offers superb, publicly-funded healthcare with a 314 bed medical facility completed in 2003 as its centre piece. Outdoor leisure facilities range from golf to sea and rod fishing, football, sailing, windsurfing, hang-gliding, diving, an outdoor shooting range, archery and trekking. Add to all this the island’s heritage, thanks to a civilisation stretching back 10,000 years, and the picture that is painted is enviable when compared with other international financial centres.
Taxation
From April 6, 2006 the general rate of corporate tax in the Isle of Man has been 0% per cent. A higher rate of 10% applies to:
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Income arising from banking business carried on by Isle of Man licensed banks; and
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Income arising from land and property in the Isle of Man, including both rental income and profits derived from dealing in or developing land.
Indirect taxation
The island imposes value added tax on supplies of goods and services in a similar manner to the UK and the Island is party to a ‘common purse’ agreement with the UK for sharing VAT receipts. The island’s VAT register is administered separately by the government’s Customs & Excise Division. Manx VAT receipts contribute significantly to the strength of the island’s public finances.
