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HMRC internal manual

VAT Isle of Man

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HM Revenue & Customs
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Extracts from the Customs and Excise Agreement 1979

An Agreement on the establishment of an Isle of Man Customs and Excise service and the transfer to it of functions performed by the Commissioners of Customs and Excise.

  1. The Governments of the United Kingdom and the Isle of Man agree to transfer the revenue functions and associated control functions of the Commissioners in the Isle of Man to the Isle of Man Customs and Excise service and to make arrangements for the assumption by the Isle of Man Government of the agency functions which at the date of this Agreement are carried out by the Commissioners in the Isle of Man and that the effective date of transfer will be 1 April 1980.

  2. Except as provided for in this Agreement or as may be otherwise agreed, the Isle of Man Government agrees to keep the law relating to the management of the Customs and Excise revenues and associated control functions correspondent with that of the United Kingdom and to legislate to maintain that correspondence whenever necessary and, in particular, when changes are made in relevant United Kingdom law.

  3. (1) Subject to sub-paragraph (2) and paragraphs 7, 7A and 7B below, the Isle of Man Government agrees to keep all Customs and Excise revenues at the same rates and subject to the same conditions and reliefs as in the United Kingdom with the following exceptions, namely -

(a) omitted;

(b) the general betting duty; and

(c) value added tax on -

(i) takings of gaming machines,

(ii) the provision of meals (excluding alcoholic liquor) in hotels, holiday camps, restaurants and similar establishments, the letting on hire of private self-drive cars, the provision of hairdressing services and the provision of laundry services (including in laundrettes), and

(iii) accommodation provided by hotels and similar establishments, including the provision of holiday accommodation and the letting of camping sites and caravan parks, and such other non-exportable services, for the time being specified in Article 98(3) of, and Annex III to, Council Directive 2006/112/EC, as may be agreed between the two Governments.

(2) The United Kingdom Government agrees that nothing in this Agreement will affect the right of the Isle of Man Government -

(a) to allow a supplementary rebate not exceeding 10p per gallon or 2.2p per litre, on hydrocarbon oil used in the Isle of Man; or

(b) to allow a supplementary rebate not exceeding 20 per cent of the excise duty chargeable on beer consumed in the Isle of Man;

so long as the Isle of Man Government advises the United Kingdom of any proposed variation in the supplementary rebate.

  1. The Governments agree that any proposal by the Isle of Man Government to depart from a rate of duty or tax charged, or relief granted, in the United Kingdom will be subject to a period of 3 months notice and to agreement by both Governments, excluding only the duties and taxes specified in sub-paragraphs (1)(b) and (c) of paragraph 6 above.

7A. The Governments agree that any proposal by the Isle of Man Government to depart from the rate at which value added tax is charged, or from the conditions and reliefs to which it is subject, on any of the services specified in paragraph 6(1)(c)(ii) or (iii) above in the United Kingdom shall be consistent with the relevant Community rules for the time being applicable in the United Kingdom and subject to agreement by both Governments.

7B. The Governments agree that any proposal by the Isle of Man Government to allow a rebate on beer consumed in the Isle of Man, or to modify (otherwise than in relation to the percentage of the rebate) or terminate the arrangements under which such a rebate is allowed, will be subject to a period of 3 months’ notice and to agreement by both Governments.

  1. The Governments recognise the separate agreement, effected by an exchange of letters between the Commissioners and the Treasurer, on mutual assistance on all aspects of the management of the Customs and Excise revenues, the associated control functions and certain agency functions, with special reference to the prevention of fraud and the detection of offences.

  2. The Governments agree to introduce arrangements (including any necessary legislation) -

(a) for the recovery in each territory of equal duties arising in the other territory;

(b) for the enforcement in each territory of judgements (other than judgements in criminal cases which are, or may be, subject to appeal) in the other territory in respect of equal duties;

(c) for the serving and execution in one territory of processes in the case of proceedings in the other territory for offences in relation to equal duties or to prohibitions or restrictions on importation and exportation and for securing, if necessary, in the case of such proceedings the attendance of persons to be proceeded against for those offences at the appropriate court in the appropriate territory;

(d) for the seizure and forfeiture in each territory of goods relieved wholly or in part from duty in the other territory for breach of any condition or other obligation required to be complied with in connection with such relief;

(e) for the hearing of appeals against decisions given in any of the proceedings mentioned in sub-paragraphs (a), (b) and (d) above under the law of the territory in which the decision appealed against was given; and

(f) for the summoning of witnesses and the production of documents and exhibits for the purposes of the matters specified in sub- paragraphs (a) to (e) above;

but no proceedings under sub-paragraph (a), (b) or (d) above shall be instituted in either territory except pursuant to the law of that territory and by, or with the consent of, the appropriate authority in that territory.

  1. The Governments agree that the United Kingdom and the Isle of Man shall be treated as a single tax area for the purposes of value added tax, but that each Government will continue to provide separately for the care and management of the tax and will make provision in its law that:

(a) value added tax shall be charged as if any necessary references therein to the United Kingdom or, as the case may be, to the Isle of Man included both places;

(b) value added tax shall not be charged in both territories in respect of the same transaction;

(c) persons who are taxable persons for the purposes of either territory may be treated as taxable persons for the purposes of the other territory; and

(d) certain removals of goods between the United Kingdom and the Isle of Man shall not be treated as an importation into, or exportation from, either territory.

  1. The Governments also agree to the following particular arrangements (including any necessary legislation) for value added tax:

(a) [This sub-paragraph dealt with arrangements for registration but these have been revised and are now as shown in paragraph 2.3 of this book.]

(b) arrangements will be made for the Customs and Excise service of each territory to have the same powers, in relation to the activities in its own territory of a person registered in the other territory, as it would have if that person were registered in its own territory;

(c) arrangements will be made by the Isle of Man Customs and Excise service for the pre-repayment verification in the Isle of Man of repayment claims of such a size and nature as is agreed between the Commissioners and the Isle of Man Treasury by exchange of letters and those arrangements will continue in force unless varied by further agreement;

(d) arrangements will be made for the verification of selected transactions in either territory at the request of the Commissioners or, as the case may be, the Isle of Man Customs and Excise service;

(e) arrangements will be made in both territories for verification of input tax;

(f) special provisions may be made to prevent tax avoidance on supplies from one territory to the other if experience shows that this is desirable;

(g) arrangements will be made for the issue of returns, transfer of records and other matters arising out of the transfer of registered traders to the customs authority of the receiving jurisdiction;

(h) responsibility for enforcement action on returns and outstanding tax from transferred traders, including tax subsequently discovered to be outstanding, will pass to the customs authority of the receiving jurisdiction from the effective date of transfer; and

(i) the value added tax and duties tribunal which shall have jurisdiction in the Isle of Man shall be appointed by the Isle of Man Government and any person appointed as chairman of that tribunal shall be a person who is for the time being a member of a panel of chairmen, appointed under paragraph 7 of Schedule 12 to the Value Added Tax Act 1994, of the value added tax and duties tribunals having jurisdiction in the United Kingdom.

  1. Omitted

  2. The Governments agree to introduce arrangements (including any necessary legislation) for the free exchange of information between the Commissioners and the Isle of Man Customs and Excise service for ensuring the proper control and administration of the equal duties and the enforcement of prohibitions and restrictions on importation and exportation, but that the information so obtained shall, except as may be required by Community obligations (or by any other international obligations) which are binding on the Isle of Man, be used for that and no other purpose.

  3. The United Kingdom Government agrees that the Commissioners will supply the Isle of Man Customs and Excise service with United Kingdom Customs and Excise guidance and with official notices and forms and the Isle of Man Government agrees that the Isle of Man Customs and Excise service will apply the guidance and adopt the format of notices and forms supplied and that any variation made by the Isle of Man Customs and Excise service will be the minimum necessary required by local circumstances.

  4. The United Kingdom Government agrees that the Commissioners will provide advice to the Isle of Man Customs and Excise service and make available training facilities and the Isle of Man Government agrees that the Isle of Man Customs and Excise service will seek guidance and advice from the Commissioners and make such use of training facilities as is necessary to secure a common approach to the management of the Customs and Excise revenues, associated control functions and agency functions.