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Budget Changes - March 2007 20 March 2007

In today’s Budget speech, the Minister for the Treasury, the Hon A R Bell MHK, announced a number of changes that will effect Isle of Man incorporated and registered companies and foreign companies registered with the Financial Supervision Commission.

A Practice Note, PN1-2007 is available with information about all of the changes mentioned in this news release.

This news release contains details relating to the following:-

1. The Corporate Charge

2. The Annual Return

3. Exceptions

4. New Annual return Forms

5. Foreign Companies

6. Extra Statutory Concession

  1. The Corporate Charge and Special Tax Regimes

    1. The Corporate Charge was introduced in July 2006 by Part 1 of the Income Tax (Amendment) Act 2006 and is set at £250. The Corporate Charge is due and payable on the 1st January 2007 for the 2006/07 year of assessment and the Assessor is responsible for its collection. The Corporate Charge is payable by both Isle of Man incorporated companies (excluding LLCs) and foreign companies registered under Part XI of the Companies Act 1931, subject to certain exceptions.
    2. Following feedback from the private sector, Treasury has decided to align payment of the Corporate Charge with the filing of a company’s annual return and the payment of the annual return fee. The Corporate Charge will therefore now be collected by the Commission. It is intended that this should simplify the administration and payment of the Corporate Charge for companies and their administrators. It will not result in an increase in fees and charges due by Isle of Man companies.
    3. In order to facilitate this change, Part 1 of the Income Tax (Amendment) Act 2006 and the associated secondary legislation was repealed with effect from the 5th April 2007. However, the Corporate Charge that is payable for the 2006/07 year of assessment will remain payable by companies which did not pay on the due date of 1 January 2007 and the Assessor will continue to pursue defaulting companies.
    4. The Treasury Minister also announced the repeal of the Legislation supporting the special company income tax regimes with effect from 6 April 2007, this includes Non-Resident Company Duty. Companies in those regimes on 5 April 2007 will automatically become subject to the resident system for Manx income tax purposes on 6 April 2007. The Assessor will not require any declaration from the company of that change in its status.
    5. Enquiries about the Corporate Charge or any of the other special regimes should be addressed to the Assessor.
  2. The Annual Return
    1. From the 6th April 2007 the Corporate Charge will be incorporated into the annual return fee payable by most companies when they submit their annual return. The new annual return fee will be £320, which is made up of the £250 corporate charge and the £70 annual return fee. Tynwald has already approved the levels of these fees and they are not being increased as a result of this change.
    2. In order to implement the change, two Fees Orders have been approved by the March sitting of Tynwald:
      1. SD 155/07 - Companies (Fees and Duties) (Amendment) Order 2007.
      2. SD 156/07 - Companies (Fees, Duties and Penalties) (Amendment) Regulations 2007.
    3. The new annual return fee is payable when an annual return is submitted for a company with a return date which falls on or after the 6th April 2007. If you are submitting a return where the return date is on or before the 5th April 2007, the existing fee of £70, along with any late fees that may be due, will be payable.
    4. Non-resident company duty will also be due and payable by every company with a return date that falls on or before 5th April 2007 unless it has submitted a notice of rescission on or before the return date. Any annual return for Non-Resident Company with a return date on or before 5th April 2007 submitted without the correct fee will be rejected.
  3. Exceptions
    1. Income Tax currently has a number of “exemptions” from the requirement to pay the Corporate Charge. These will be continued under the new regime. As a result, the following companies will be exempted from the TOTAL AMOUNT of new annual return fee:
      1. Charities – a charity is defined as a company which, on its return date is registered as a charity under the Charities Registration Act 1989, or a company that is a wholly owned subsidiary of a charity;
      2. Dormant Companies – a dormant company is defined as a company which is administered by the holder of a CSP licence issued under the Fiduciary Services Acts 2000 and 2005 and which has not undertaken any activity by way of business or otherwise, has no assets or liabilities and has neither received income nor incurred expenditure other than costs associated with the incorporation of the company and the issue of its shares;
      3. Property Management Companies – a property management company is defined as any company whose sole purpose is to receive regular payments from occupants of real property which are used by that company solely for the management, repair and maintenance of the common parts of that property;

      Collectively, these will be referred to as “excepted” companies.

    2. While excepted companies will not have to pay the annual return fee, they will be subject to late filing fees if they do not deliver their annual return within the prescribed filing period. This is in line with the extra statutory concession granted to charities in July 2005.
    3. The annual return form has been amended to make provision for a company to claim relief from payment of the annual return fee.
  4. New Annual Return Forms
    1. The annual return forms submitted by companies incorporated and registered under the Companies Act 1931and the Companies Act 2006 have been amended to take account of the new annual return fee. Reference to non-resident companies has been removed and provision has been made for companies to claim relief from payment of the annual return fee if they are an “excepted” company. The following orders were laid before the March sitting of Tynwald and take effect on the 6th April 2007:
      1. SD 175/07 - Companies (Annual Return) Regulations 2007.
      2. SD 176/07 - Companies (Forms) Regulations 2007.
    2. The new annual return form should be used for all return dates on or after 6th April 2007. If you are submitting a return where the return date is on or before the 5th April 2007, the old form should be used.
  5. Foreign Companies
    1. The Corporate Charge is payable by both Isle of Man incorporated companies (excluding LLCs) and Foreign Companies registered under Part XI of the Companies Act 1931. It has therefore been necessary to introduce an annual declaration and an annual return fee for foreign companies.
    2. To achieve this, Sections 315 and 315A of the Companies etc. (Amendment) Act 2003 have been enlivened at the March sitting of Tynwald by the following order:
      1. SD 107/07 - The Companies, Etc. (Amendment) Act 2003 (Appointed Day) (No.4) Order 2007.
    3. The Annual Declaration should be made on the anniversary of the incorporation of the Foreign company. However, any Foreign company that was registered before the 6th April 2007 and whose first Annual Declaration falls due in the period between 6th April 2007 and 30th September 2007 will not be required to file the Annual Declaration for 2007 until 1st October 2007. This is to allow the Commission time to contact the companies and inform them of the change.
    4. The order also inserts new paragraph (d) and (e) after Section 313(1) (c). These changes require a Foreign company to:
      1. appoint a designated officer to deliver for registration any document filed on the company’s behalf, and
      2. notify the address of the company’s registered office OR its principal place of management and control.
        Both of these changes should be notified on the amended form 3F.
    5. The new Annual Declaration is prescribed in the following Forms Order that was laid at the March sitting of Tynwald:
      1. SD 176/07 - Companies (Forms) Regulations 2007.
    6. The new Annual Fee, which includes the Corporate Charge is prescribed in the following Fees Order that was approved by Tynwald at the March sitting:
      1. SD 155/07 - Companies (Fees and Duties) (Amendment) Order 2007.
    7. Two amended Practice Notes are also available that outline the changes:
      1. Practice Note 2/2007- Registering a Foreign Company in the Companies Registry.
      2. Practice Note 3/2007- Filing Obligations of a Foreign Company Registered under Part XI.
  6. Extra Statutory Concession
    1. In order to ensure that these changes do not result in unfair treatment of companies which have a return date early in the tax year and who would, as a result have to pay Corporate Charges for 2006/07 and 2007/08 within a very short period of time, it has been decided to introduce an extra statutory concession that will allow the Commission to extend the filing period for all companies which are not administered by a Corporate Service Provider and which submit their annual return either without the new fee or on the incorrect form.
    2. Provided the annual return is submitted on time, this extra statutory concession will allow the company an additional 3 months to submit the correct form and fee without incurring a late filing fee. However, if the company fails to submit its annual return on time or within the extended period a late filing penalty will be incurred. This is in line with an existing concession and should ensure companies continue to file their returns on time.
    3. This concession is aimed at local trading companies that are not administered by a Corporate Service Provider. This is because most Corporate Service Providers invoice their clients in advance and should have not only the annual return fee, but the corporate charge already in hand. The Commission is also circulating details of these changes directly to licence holders to assist them to manage the changes.
    4. The following Extra Statutory Concession has been was approved by Tynwald: GC07/07 - The Financial Supervision Commission, Extra Statutory Concession, Companies Act 1931 To 2004, Annual Return Fee - Transitional Arrangement.

Copies of all of the Orders, forms and practice notes mentioned in this Practice Note are available on the Commissions’ web site at www.fsc.gov.im. Any person requiring further information on this Practice Note should contact the Companies Registry at the below address:

Companies Registry
P.O. Box 345
Finch Road
Isle of Man
IM99 2QS

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