VAT: Isle of Man charities
Published 9 December 2015
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Who is likely to be affected
Charities subject to the jurisdiction of the High Court of the Isle of Man (IoM) that make and receive supplies in the UK.
General description of the measure
This measure ensures that charities subject to the jurisdiction of the High Court of the IoM are able to obtain the same charity VAT reliefs as charities in the UK, provided that they also meet the other conditions in Schedule 6 to the Finance Act 2010.
This will be achieved by making it clear that the High Court of the IoM is a relevant UK court for VAT purposes.
Policy objective
Since the introduction of VAT in 1973, the IoM has, by agreement, been treated as part of the UK for VAT purposes. The government wishes to avoid any doubt that charities subject to the jurisdiction of the High Court of the IoM are capable of qualifying for UK VAT reliefs for charities when they make or receive supplies in the UK.
Background to the measure
A new definition of ‘charity’, for tax purposes, was introduced in Finance Act 2010.
As well as organisations subject to the jurisdiction of a relevant UK court, the effect of the new definition was to allow organisations in ‘relevant territories’, which would be charities under the law of England and Wales if they were established here, to qualify for UK charity tax reliefs. Relevant territories outside the EU are listed in Regulations and currently consist of the non-EU Member States of the European Economic Area.
The new definition of charity for tax purposes applied to VAT with effect from 1 April 2012.
This amendment will put it beyond doubt that charities subject to the jurisdiction of the High Court of the IoM are capable of qualifying for UK VAT reliefs for charities. IoM organisations are entitled to this treatment by virtue of the Principal VAT Directive and the 1979 Customs and Excise Agreement between the IoM and the UK.
Detailed proposal
Operative date
The measure will have effect from the date of Royal Assent to Finance Bill 2016.
Current law
Current law is contained in Section 30 of and Part 1 of Schedule 6 to the Finance Act 2010.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to amend paragraph 2(2) Part 1 of Schedule 6 to Finance Act 2010. After sub-paragraph (2)(c) the following will be added ‘(and, for enactments relating to value added tax, includes the High Court of the IoM)’.
This puts beyond doubt that charities subject to the jurisdiction of the High Court of the IoM are capable of qualifying for UK VAT reliefs for charities.
Summary of impacts
Exchequer impact (£m)
| 2015 to 2016 | 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
The measure is not expected to impact on individuals, households or family formation, stability or breakdown.
Equalities impacts
The measure is not expected to have any equalities impacts.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses and civil society organisations.
The only organisations potentially affected by the change are charities subject to the jurisdiction of the High Court of the IoM. It is estimated that there are around 1,000 such charities. The administrative costs of applying for VAT reliefs are expected to be negligible.
There should be no impact on UK charities and businesses.
Operational impact (£m) (HM Revenue and Customs or other)
There will be no significant operational impact.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review by communication with taxpayer groups affected by the measure.
Further advice
If you have any questions about this change, please contact Michelle Stokell on Telephone: 03000 585127 or email: michelle.stokell@hmrc.gsi.gov.uk.