Insights

The essential guide for UK companies employing Isle of Man residents.

By January 14, 2024No Comments

The Isle of Man is a fantastic place to live. The scenery is stunning, the crime rate is the lowest in the British Isles and our public services are also pretty good. Quality of life here is second to none.

In addition to this, we have no capital gains tax, no Inheritance tax, 0% company tax and a top rate of 20% income tax.

Now that we live in a world where remote working is the norm, it is increasingly possible for people with UK employers to move themselves and their families to our lovely Island to live without having to change their existing job. 

This short article explains how the employment arrangements can work in practice.

How does it work if you want to live in the Isle of Man if you have a UK employer ? 

Legally, the Isle of Man is a separate jurisdiction to the UK. We have our own laws, our own Government and as noted above – our own tax system.

Considering this, you would expect that if an employee of a UK company relocates to the Isle of Man, it will create significant complications for that employer and also for the employee as that UK employer has no place of business in the Isle of Man.

Thankfully making arrangements for this to work seamlessly is much easier than you might think. There are two options:-

Option 1 – UK Company runs an Isle of Man Payroll for Manx Employee(s).

The UK company can register as an ‘Isle of Man employer’ by completing the relevant form T30c. The UK company will not need an Isle of Man address or registration as a foreign company to do this.

Following this – the UK company will operate an Isle of Man payroll just like a local business. Isle of Man employees will be on PAYE with deductions taken monthly. Katz & Co provides assistance with IOM payroll if needed so feel free to ask us.

This option is strongly preferred by the Income Tax Division as it means both employer and employee National insurance is paid to the Isle of Man Treasury as a part of the monthly PAYE rather than to HMRC.

Option 2 – UK Company refuses to set up an Isle of Man Payroll.

If the UK company will not set up an Isle of Man payroll – (perhaps they are disorganised or simply can’t be bothered) then – the Isle of Man Income Tax Division will be disappointed’ – however, they will accept it. 

In fact the Isle of Man / UK double tax agreement requires that the Isle of Man authorities accept it.

In this case, the UK company will continue to employ the Isle of Man resident employee via their existing UK payroll – BUT  the employer will inform HMRC that the employee is a non UK resident and arrange for the employee to have their deductions on an NT tax code. See here 

The NT tax code means that the employee will have the usual NI deductions paid to HMRC but receive the balance of their pay gross – without any deduction of UK income tax.

As the employee is an Isle of Man tax resident, they will be required to declare this employment income on their Isle of Man tax return where it will be taxed at the relevant Isle of Man rate. 

Related Isle of Man Tax content…

Isle of Man Tax explained for new residents.

Buying Isle of Man Investment Property – a technical FAQ

Unravelling the mysteries of Isle of Man tax residency.

DISCLAIMER; THIS ARTICLE IS A GENERAL EDITORIAL COMMENTARY ONLY. IT IS NOT INTENDED TO BE AND DOES NOT CONSTITUTE LEGAL ADVICE.

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