Isle of Man lures superyachts on to its books

By Andrew Bounds, ft.com

 

Better known for its annual TT motorcycle races, the Isle of Man is aiming to move upmarket by attracting more superyachts.

With average summer temperatures of less than 14C – two degrees lower than that in southern England – and buffeted by the Irish Sea, the offshore jurisdiction may be an unlikely home for a billionaire’s plaything.

Yet the Isle of Man hope to add to the 410 vessels already on its yacht register by allowing vessels owned in Monaco and Switzerland to join, after the pair were left off a 2009 list of permitted countries.

The move would allow yachts owned by corporate structures in the two countries to be registered on the island, providing lucrative fees for lawyers and boat managers.  A network of financiers and service providers also specialise in arranging mortgages, insurance, crews and maintenance for vessels.

About 2 per cent of the Isle of Man’s workforce is employed in the shipping industry, which generates £11m annually in benefits.  Yachting accounts for about a quarter of that, with 100 commercial yachts – those plied for hire – on the list.

The sector has grown in importance as offshore banking, the mainstay of the Manx economy, has declined upper pressure from rich countries chasing down their citizens’ hidden cash.

“It is part of the island’s move to diversify away from financial services,” said Dick Welsh, director of the Isle of Man’s ship registry, the world’s 15th largest by tonnage.  “And we’ve a long tradition in shipping, back to when people had to leave the island to serve on ships for months on end.”

While the register was established only a decade ago, the financing of yachts has a longer history.  Yet the UK’s decision to challenge VAT relief, which affects the Isle of Man too, had the effect of dissuading many yacht owners from buying via the island.

That led Chris Allix, director of service provider Dominion Marine and a pioneer of shipping services on the island, to start using companies’ based in Monaco, where the rules are more relaxed.  The Max recognition will allow those yachts to be registered on the island.

“The Monegasque government bit my hand off,” Mr Allix said.  “This is not tax avoidance, it is tax deferral.  It seems the UK is not interested in this tax.  This is tax from people not resident is in the UK.”

National tax authorities have also cracked down on those who claim they are chartering their vessel, which allows them to buy VAT-free and lets them deduct fuel purchased from tax, when in practice it is used by family and friends only.  Keith Miller, a partner at Dow Schofield Watts VAT, said there was a “constant battle” between owners and the tax authorities.

“The underlying principle is that VAT is a cost on the consumer, not a cost on business.  A lot of wealthy owners cannot afford it unless they lease it out and use it partly for business purposes,”  he said.

With average summer temperatures of less than 14C – two degrees lower than that in southern England – and buffeted by the Irish Sea, the offshore jurisdiction may be an unlikely home for a billionaire’s plaything.

Yet the Isle of Man hope to add to the 410 vessels already on its yacht register by allowing vessels owned in Monaco and Switzerland to join, after the pair were left off a 2009 list of permitted countries.

The move would allow yachts owned by corporate structures in the two countries to be registered on the island, providing lucrative fees for lawyers and boat managers.  A network of financiers and service providers also specialise in arranging mortgages, insurance, crews and maintenance for vessels.

About 2 per cent of the Isle of Man’s workforce is employed in the shipping industry, which generates £11m annually in benefits.  Yachting accounts for about a quarter of that, with 100 commercial yachts – those plied for hire – on the list.

The sector has grown in importance as offshore banking, the mainstay of the Manx economy, has declined upper pressure from rich countries chasing down their citizens’ hidden cash.

“It is part of the island’s move to diversify away from financial services,” said Dick Welsh, director of the Isle of Man’s ship registry, the world’s 15th largest by tonnage.  “And we’ve a long tradition in shipping, back to when people had to leave the island to serve on ships for months on end.”

While the register was established only a decade ago, the financing of yachts has a longer history.  Yet the UK’s decision to challenge VAT relief, which affects the Isle of Man too, had the effect of dissuading many yacht owners from buying via the island.

That led Chris Allix, director of service provider Dominion Marine and a pioneer of shipping services on the island, to start using companies’ based in Monaco, where the rules are more relaxed.  The Max recognition will allow those yachts to be registered on the island.

“The Monegasque government bit my hand off,” Mr Allix said.  “This is not tax avoidance, it is tax deferral.  It seems the UK is not interested in this tax.  This is tax from people not resident is in the UK.”

National tax authorities have also cracked down on those who claim they are chartering their vessel, which allows them to buy VAT-free and lets them deduct fuel purchased from tax, when in practice it is used by family and friends only.

Keith Miler of DSW VAT Services

Keith Miller, a partner at Dow Schofield Watts VAT, said there was a “constant battle” between owners and the tax authorities.

“The underlying principle is that VAT is a cost on the consumer, not a cost on business.  A lot of wealthy owners cannot afford it unless they lease it out and use it partly for business purposes,”  he said.

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