Isle of Man chief minister fights back after VAT jet trail uncovered

Isle of Man chief minister Howard Quayle has mounted a robust defence of his jurisdiction’s integrity in the light of further Paradise Papers revelations, insisting that the island is not a ‘tax haven’.

It is, in fact, one of the most compliant countries in the world when it comes to tax and transparency, he said, and is an early adopter of international standards that other countries fail to adopt, therefore putting the island “at a disadvantage”, he claimed.

Quayle made his points in an interview with presenter John Humphries on BBC Radio 4’s Today programme, on the morning of 7 November, in response to news that Formula 1 driver Lewis Hamilton, pictured left, had ‘dodged’ paying tax on a private jet in a transaction effected on the Isle of Man.

It was revealed as part of the huge leak of documents belonging to Bermuda-based law firm Appleby – reported by International Investment back on October 25, one of only a handful of media outlets to report on the story at the time – that Hamilton had received a £3.5m VAT refund on his acquisition of a £16.5m Bombardier Challenger 605.

There is no suggestion that Hamilton acted unlawfully, having sought professional advice and having acted upon that advice.

But the legality of the structure that was used has been called into question. This structure has been used in the purchase of some 231 private jets in the past six years, resulting in more than US$1bn (£790m) in VAT refunds.

The Isle of Man had already taken the decision, on October 24 as announced on the Isle of Man government’s website to call in HM Treasury to assess the legality of the VAT avoidance scheme.

The scheme essentially applied to the importation of jets into the EU; while the Isle of Man is not an EU member state, it is obliged to charge VAT on goods and services that are subject to the tax, including private jets.

Crucially, the jet owner needs a document called a C88A issued by Manx customs that asserts that the jet owner has paid any taxes due; without this form, the owner cannot fly freely around EU member states and even risks the jet being impounded in countries such as France.

In a highly complex structure, Hamilton appears to have used shell companies in the Isle of Man, Guernsey and the British Virgin Islands (BVI) to carry out his acquisition of the jet and a £1.7m motorhome.

Eugene Costello
Eugene Costello has been a journalist for some 20 years, and has written for a wide variety of UK and international newspapers and magazines.

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