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Newsletter | Articles Tax Cap for Corporate Businesses under Consideration Multi-million pound businesses in the Isle of Man – including leading high street and private banks – could benefit from a proposed new tax cap on profits from their annual income in the future. Many businesses are already subject to standard zero rates of corporate tax and banks and property companies have had their income tax cut to 10 per cent on normal trading profit whilst all other income, including liability on reserves, is now zero-rated. However, if the tax cap on corporate profits is given the go-ahead the tax on the banks’ normal trading profits would be capped at a fixed annual amount. Industry responds favourably The Isle of Man Treasury has consulted with the relevant sectors of the finance industry, which considered a corporate cap to be extremely favourable and particularly attractive to large banking concerns. It has been suggested that £6 million should be the level at which the cap is set and it is just above the highest tax currently being paid by any company operating in the Island. If the proposed corporate tax cap were implemented at £6 million, a company would not pay any additional tax on profits in excess of this amount. The £6 million move would provide an added incentive for banking groups to consider the Island as a base of operations where they could generate added profits by capping their entire group corporate tax liability. The Treasury described the potential cap as a further demonstration of ‘the Isle of Man’s stated intention to move to an overall zero rate of corporate tax when future revenues permit.’ It is expected that its introduction will be reviewed in 2007. Phased zero policy The current standard zero rate of business tax was phased in over a five year period. This proved successful in attracting further inward investment. A tax cap of £100,000 on personal income was introduced in the Budget earlier this year in a bid to encourage the industry’s highfliers to make their homes in the Island and bring their businesses along with them. Although the proposal is in its roll-out stage it has already generated significant international interest. Several prospective new residents in this high-earning income bracket are reported to be making concrete plans to move to the Island. Next five-year plan The latest tax cap proposal is regarded as just one part of the Island’s planning strategy for the next five years. Treasury Minister Allan Bell has asked key officials, including the Income Tax Assessor, to formulate a future plan with the object of building on the success of the zero tax strategy and maintaining the current momentum in the growth of the Island’s economy. Further information from Peter Beighton.