Starting a business on the Isle of Man
The self-governing crown dependency has held the reputation as being a tax-haven for many years. So, should you start a business on the Isle of Man?
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Why start a business in Isle of Man?
Located in the middle of the Irish Sea, the Isle of Man is a crown-dependency state that sits outside the UK, European Union (EU) and European Economic Area (EEA) – while the Queen remains head of state.
Legally entitled to make and pass its own laws, the island is renowned for its low taxes – with some extraordinarily wealthy individuals calling the island home.
Businesses on the island pay 0% corporation tax, 0% stamp duty and 0% capital gains tax – an important consideration for entrepreneurs looking for high growth and an eventual exit. While financial services and property businesses pay 10% corporation tax.
Businesses located on both the Isle of Man and UK will pay the respective tax rates on what they earn in each jurisdiction.
Personal tax is set at a threshold of 20%, regardless of earnings – with residents given the option to be a tax capper at £125,000. Inheritance tax is also set at 0%.
With over 21 different sectors, the island boasts a much more diverse economy than other crown dependencies such as Channel Islands, Jersey and Guernsey.
While agriculture and tourism were historically the main sectors on the island, manufacturing, e-gaming and financial services are now prominent due to the tax regime – as a result, the island can claim excellent connectivity and broadband speeds with some local shops and pubs even accepting bitcoin.
According to official government statistics, the island’s tech sector grew by 8% in 2016, and now accounts for around 30% of the island’s economy.
Though home to many seasonal businesses, the rise in popularity of adventure sports and golf have eased tourism’s dependency on good weather in recent years.
Home to over 200 manufacturing businesses employing more than 8,000 people, it also has an impressive aerospace cluster – with every aircraft in the world containing at least one part either manufactured or designed on the island.
The ‘Mann’, as its sometimes known, is perhaps most famous however for holding the Isle of Man Tourist Trophy or TT, an international motorcycle race which attracts worldwide attention and sees the population of the island double when in progress.
Served by Ronaldsway Airport, you can fly direct to the island from the UK and Ireland – with routes to and from Switzerland available during the summer. The Isle of Man sea terminal also offers easy access to the UK and Ireland.
A country synonymous with low tax and wealthy inhabitants, the island has an unemployment rate of just 1% in May 2017 – with long term unemployment halved since 2014 and a 75% reduction in youth unemployment since 2013.
Access to talent in the Isle of Man
Despite being outside the UK and the EU, the Isle of Man’s immigration policies are controlled by the British government and are thus identical in terms of freedom of movement and the requirement to obtain visas for some foreign workers.
The island is home to one university – the University College Isle of Man (UCM) which offers a range of courses for school leavers and adults returning to education including NVQs, GCSEs, BTECs, City and Guilds, OCR Nationals and A Levels.
|Increase in enlistings in apprenticeships 2016/2017:||19%|
Specialising in tech, the university offers a range of ICT/computer science further and higher education courses – with a cybersecurity degree launched last May.
In a bid to tackle the digital skills gap, the Isle of Man Code Club, which runs every weekend, teaches five to 16 year-olds coding and 3D printing – and boasts 600 members.
Access to business support in Isle of Man
Due to the island’s ‘short communication’ channels and dislike of bureaucracy, a huge amount of business support and advice can be obtained from the government on an ad hoc and informal basis.
Adrian Moore, business development manager at the Department of Economic Development, says “You can speak to anyone in government and say ‘I’m not sure what to do or who to speak to’ and they’ll direct you. The ways of communicating on the Isle of Man are quite short.”
Given the wealth of the island, successful entrepreneurs are also plentiful and there is a strong angel network on the island – with a lot of networking events taking place.
|Number of new start-ups created in 2016:||62|
Positively Isle of Man, a community group headed by several successful entrepreneurs, meet regularly to discuss, among other things, business opportunities on the island as well as the business books and advice they ascribe to.
The Bridge Angel Network also hosts a series of invite-only networking events which allow attendees to meet with potential investors.
For tech start-ups, the International Centre of Technology (ICT) is located in The Nunnery, just outside Douglas. Having opened in 2016, the start-up hub partners with UCM and provides training courses in IT to support the local technology cluster.
Barclays Bank is also opening a new start-up incubator before the end of 2017, in a location yet to be determined.
The Manx ICT Association (MICTA), the trade association for IT businesses on the island, also provides support and advice, as well as helping members to lobby government and employ apprentices.
Access to grants and funding in Isle of Man
There are a number of start-up grants available for businesses based on the Island – with the condition that the business owner be an official resident of the Isle of Man.
The island’s Department of Economic Development invested over £4.5m in local businesses in 2016, across a range of sectors.
Small business grants on the Isle of Man include:
Micro business grant scheme: Meeting with a business development manager, entrepreneurs receive a five-day free course which takes them through all the fundamentals of setting up and running a business – such as law, tax advice, marketing, recruitment, payroll and accounts. Applicants are required to commit 30 hours a week to working on their business, have a turnover of up to £50,000, and must only have two employees or less. Up to £5,000 in funding is available for potential applicants. In its first 12 years, the scheme has financially supported over 1,000 businesses and advised more than 390 start-ups.
Small business grant scheme: Designed to help accelerate the growth of exporting businesses, the small business grant scheme is available for start-ups with between one and 10 employees. The scheme offers grant support of up to 40% of eligible expenditure to a maximum of £25,000. In particular, funds may be used to facilitate R&D. Once again business owners, who must own at least 50% of the business, must commit 30 hours a week to their enterprise.
Business support scheme: Designed to help small businesses implement project and consultancy work, the business support scheme offers a grant of 50% towards the cost of projects in a wide range of business disciplines including e-business, environmental efficiency, retail consultancy and information tech. Assisting with a maximum of £4,500 per project, the department will pay 50% of all costs with the business owner required to pay the other 50%. A business development consultant will carry out a free of charge strategic review of an applicant’s business with businesses also able to receive free mentoring for up to three hours over six months.
Other schemes available on the island include:
- Enterprise development scheme (EDS)
- Vocational training assistance scheme
- Town and village centre regeneration scheme
- Green business loan scheme
- Staff development scheme
- Financial assistance scheme
- Telecom connection voucher
The island is also home to angel investor network and accelerator Bridge which see pitches from local entrepreneurs and start-ups considering re-domiciliation. It currently has 73 investors and has backed 21% of all businesses presented to it. This figure is significantly higher than seen in the UK where the success rate is approximately 1%.
|Number of entrepreneurs receiving government-backed training in 2016:||180|
UK-founded SPARK Impact, which provides seed funding, also has a presence on the island and currently manages the £50m EDS which offers investment to businesses based on or relocating to the Isle of Man.
Quality of life on the Isle of Man
Not surprisingly, the island has a much more relaxed environment than any cities in the UK – so entrepreneurs looking for a fast-paced city that never sleeps should best stay away.
With 100 miles of coastline, the island is renowned for its stunning scenery and would certainly suit fans of the great outdoors.
Not surprisingly, the island is also a fond favourite for foodies with Isle of Man kippers, queenies and Loaghtan achieving international recognition.
The average price of a house in the Isle of Man is £271,200 – with flats going for an average price of £139,430. For both flats and houses sold, the average price was £249,150 in 2016.
Compared to UK average of £215,847, property on the island is relatively expensive.
Holding one of the lowest crime-rates of anywhere in the British Isles, in 2016 the island recorded its lowest incidence of crime since 1970 – with just 1,968 crimes recorded from April 1 2015 to March 31 2016.
With a small parliament, the island prides itself on a lack of bureaucracy and red tape – with parliamentarians aiming to take a more direct approach to governing.
Testament to this is the fact the island has no speed limits outside major towns – with no speed cameras or sleeping policemen in general.
Business opportunities and considerations on the Isle of Man
Compared to the UK, the island does have several limitations that wannabe Manx business owners from the UK should consider while plotting their big move.
Not having any natural resources, the island is incredibly reliant on importing, and when exporting, must send goods to the UK first – and then further afield if required. The island is, though, in the Customs Union with the UK and VAT sharing agreement.
Adrian Moore, business development manager at the Department of Economic Development, recommends start-ups consider the implications of being very import and export reliant when deciding on what business to start.
“The Isle of Man’s logistics networks work really well. That being said, there is an obvious additional cost to your business being here as opposed to being on the mainland. The models that work best in the Isle of Man is a product that is high value and low mass.”
While starting your own businesses always comes with significant risk, Moore maintains that entrepreneurs who go down the franchisee route can prove to be quite popular – even very early on.
“One of the things the island is particularly hungry for is the franchise model. We have loads of very good independent shops, but if you’re able to afford a franchise, and use a big name behind it, then that can enable you to launch a business quicker.”
While there are indigenous businesses on the island that purely serve local inhabitants, Chris Hall, angel investor and non-executive director for Scout4, says scale-ups will normally also have a UK presence.
“The most likely model is to have offices in several different places. It’s just more realistic. As an entrepreneur, I’d say that if you’re 100% internet-based and B2C I could see you being 100% on the Isle of Man, you could do everything here and be self-sufficient. However, if you’re B2B and have to manage distributors and resellers, it makes sense to have people in the UK.”