Tag: Corporate Services

Residence-Based Regime for UK Inheritance Tax and Foreign Income and Gains

Posted on | by Megan Raguro

As part of its wide-ranging changes to the current non-domicile (non-Dom) regime, the UK government is set to introduce a residence-based regime for both Inheritance Tax and Foreign Income and Gains with effect from 6th April 2025.

This is a major shift from the historic domicile-based regime and presents both challenges and opportunities for individuals who may already be UK tax resident or considering taking up residence in the UK post April 2025 who would previously have taken advantage of the non-Dom regime.

One possible mitigation strategy is to use an Isle of Man (IoM) company to hold non-UK property related investments, ensuring that the situs of the investment remains outside the UK.

Residence-based regime for Inheritance Tax

The most significant change is that from 6 April 2025, the test for whether non-UK assets owned by UK resident individuals will be subject to IHT will be whether the individual is deemed as “Long Term Resident”. A long-term resident being an individual has been resident in the UK for 10 of the proceeding 20 years prior to the tax year in which the chargeable event arises.

New Foreign Income and Gains (FIG) Regime

An additional change is that with effect from 6 April 2025 the UK’s new FIG regime which will replace the existing remittance basis of taxation currently available to Non-Dom’s, providing 100% relief on FIG for new arrivals to the UK for their first four years of tax residence, provided they have not been UK tax residents in any of the 10 consecutive years prior to their arrival.

Why Use an Isle of Man Company?

The Isle of Man offers a robust and internationally recognised jurisdiction, adhering to the highest international standards. Key benefits of using an IoM company for newly arrived UK resident include:

  1. Succession and Estate Planning: Investments held through an IoM company, including UK situs non-property investments, fall outside UK inheritance tax (IHT) until the individual is deemed “Long Term Resident.”
  2. Non-UK Situs for Investments: A properly structured IoM company is considered non-UK situs, meaning its assets are not directly held by UK individuals. This can potentially mitigate UK tax exposure under the new FIG regime for the first 4 years of residence. This presents planning opportunities for individuals who do not intend to remain in the UK in the longer term
  3. Favourable Tax Environment: The Isle of Man has a 0% corporate tax rate on most income, no capital gains tax, and no withholding tax on dividends, making it an attractive jurisdiction for investment holding structures.
  4. Investor Confidentiality: The Isle of Man maintains a high level of investor privacy and protection, making it an appealing choice for high-net-worth individuals and family offices.

Conclusion

The increasingly mobile nature of HNW individuals means that using an Isle of Man company can provide significant tax efficiencies by ensuring that investments remain non-UK situs, thereby reducing exposure to UK taxation in the short to medium term.

However, as always careful structuring and professional tax advice are imperative to when considering any structuring.

If you would like to talk to us about how an Isle of Man Company might be appropriate for you or your clients, please contact us: advice.iom@dixcart.com.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Service Authority

Redomiciling Your Company to the Isle of Man

Posted on | by Charlotte McGonigle

Global mobility and the portability of Corporate Structures has become increasingly important to Clients and their Advisers, who often move corporate entities from one jurisdiction to another. A prerequisite to Redomiciliation is that both the jurisdiction of incorporation, and the new jurisdiction where the Company will continue, both make provision for this in their Company Law. Like many international financial centres, the Isle of Man’s Companies Acts enable Redomiciliation.

What Effect Does Redomiciliation Have on the Company?

The continuance of a Foreign Company in the Isle of Man does not create a new legal entity or prejudice or affect the continuity of that company, its assets, liabilities, and obligations.

If the Company undertakes a licensable activity, such as Banking, Insurance, E-gaming etc. it will need to contact the corresponding Regulatory Authority or Licensing Body to ensure that there are no issues.

Consideration must also be given to the name of the continuing company, ensuring that it complies with the relevant Companies Acts and any restricted words and phrases where prior permission will need to be sought, as detailed by the guidance provided by the Isle of Man Companies Registry.

Why are Companies Redomiciled?

Redomiciliation is carried out for a wide variety of reasons, which can include:

  • The facilitation of operational efficiencies.
  • To undertake restructuring.
  • Moving to a reputable jurisdiction to provide comfort to investors, lenders, and banking institutions.
  • To benefit from political and economic stability.
  • To change Trust & Corporate Service Provider for better service.

You can read more about the benefits of Isle of Man Companies here.

Why Redomicile Your Company to the Isle of Man?

The Isle of Man is a leading international financial hub that is globally recognised as well regulated and a reputable jurisdiction to do business from.

Those Foreign companies seeking to Redomicile to the Isle of Man have a choice of Companies Acts to register under – the more traditional Companies Act 1931, or the streamlined Companies Act 2006 – which provides a large degree of flexibility.

Once Redomiciled, the company can benefit from the Island’s tax regime, boasting rates such as 0% Corporate Tax, 0% Capital Gains Tax and no Withholding Tax on Dividends.

The Island is politically neutral and business friendly, meaning that the legislative environment is reliable and enduring, particularly as the Isle of Man makes its own laws. In addition, whilst the Case Law of England & Wales is persuasive, it is not binding.

The Isle of Man’s credit strength, diverse economy and ability to comply with global tax standards are all reflected in its Moody’s Credit Rating of Aa3 Stable, per their 01 November 2023 assessment.

How Can Dixcart Assist with Your Redomiciliation?

Dixcart Management (IOM) Limited is Licensed and Regulated in the Isle of Man to deliver Trust & Corporate services and has been in operation since 1989.

Our expert team of qualified professionals has been developed to administer clients’ Isle of Man Companies, Trusts and Foundations to an exceptional standard, delivering a tailored and dedicated service.

You can read more about how our Isle of Man office can support your Corporate Structuring here.

Contact Us

If you are considering Redomiciling your company to the Isle of Man or changing service provider, get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Service Authority

Key Benefits and Uses of an Isle of Man Trust

Posted on | by Megan Raguro

The Isle of Man, a well-regulated jurisdiction with a long history of providing financial services, offers Trusts that are highly regarded for their flexibility, confidentiality, and robust legal framework. While tax efficiency is often cited as a benefit, the advantages and applications of Isle of Man Trusts extend far beyond taxation. When managed by a professional Trust Company, these structures serve as versatile tools for asset protection, estate planning, wealth management, and philanthropy.

Key Benefits of an Isle of Man Trust

  1. Asset Protection: An Isle of Man Trust can safeguard assets against potential claims, including those arising from divorce, bankruptcy, or legal disputes. The jurisdiction’s robust Trust laws protect the Trust’s validity, making it a secure option for individuals seeking to safeguard their wealth.
  2. Wealth Succession and Estate Planning: Trusts provide a means of ensuring that the Trust Fund can be distributed according to the Settlor’s wishes, both during their lifetime and after their death. They can help mitigate family disputes and simplify the transfer of assets across generations.
  3. Flexibility: Trusts can be tailored to suit individual or family needs. For example, discretionary Trusts allow Trustees to make decisions about distributions based on beneficiaries’ circumstances, ensuring adaptability over time.
  4. Confidentiality: Unlike Wills, which may become public after probate, Trusts allow the settlor to maintain privacy over their financial affairs.
  5. Philanthropic Endeavours: Isle of Man Trusts may be established with a view in whole or part to supporting causes the Settlor cares about while benefiting from the jurisdiction’s favourable regulatory environment.
  6. Diversification of Asset Management: Trusts enable individuals to separate ownership from management. Professional Trustees can oversee investments, ensuring they align with long-term goals.

Not Just About Tax

While the Isle of Man offers a favourable tax regime in certain circumstances, its Trusts are not solely focused on tax benefits. The jurisdiction has implemented regulation to ensure compliance with international standards, which enhances the legitimacy and integrity of its financial structures.

Case Study

Background: An opportunity arose for the Management Company of a retirement village to purchase the Freehold Title to the properties within a retirement community.

When originally incorporated, the Management Company’s sole purpose was to receive management fees for the upkeep and maintenance of the community. As such, residents were satisfied that the Company’s shareholders be drawn from members of the Company’s board of Directors.

Upon acquisition of the Freehold title, this arrangement was no longer deemed appropriate, as the Company now held sizable assets, which would form part of the shareholders’ personal estates.

Solution: Various options were considered, including issuing shares in the management company to each Leaseholder. However, due to the number of individual Leaseholders, the administrative burden was deemed too high.

Instead, the current shareholders established and settled the shares in the Management Company into an Isle of Man Trust, of which the class of Beneficiaries was defined as the current Leaseholders of various properties within the community.

Outcome: The establishment of the Isle of Man Trust successfully removed the sizable assets from the personal estates of the Management Company’s shareholders, mitigating potential inheritance and succession disputes. It also ensured that the Freehold title was managed collectively and impartially for the benefit of all Leaseholders. The Trust’s professional Trustees provided a neutral and experienced oversight, streamlining administration and enhancing transparency. Leaseholders’ interests were safeguarded, and the arrangement reinforced community harmony by aligning ownership and management with the collective benefit of the retirement village residents.

Conclusion

An Isle of Man Trust is a powerful and versatile financial tool that offers far more than just tax efficiency. It provides a secure and flexible framework for protecting assets, planning for the future, and supporting philanthropic endeavours. If you would like to talk to us about how an Isle of Man Trust might be appropriate for you or your clients, please contact us: advice.iom@dixcart.com. Regulatory Rubric

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Registered in Isle of Man. Company Number 45258

Isle of Man Trust Basics: The Three Certainties

Posted on | by Charlotte McGonigle

Trusts provide a legal arrangement for the separation of legal and equitable title to defined assets. However, in order for a Trust to be valid it must be properly constituted.

Among other constitutional requirements, the three certainties must be present at inception. The doctrine of the three certainties is a fundamental principle in Trust Law and ensures that the Trust exists under law, can be executed and is enforceable. Simply put, a Trust cannot exist without the three certainties.

In this short article, we take a look at the doctrine of the three certainties, why they are important and what can happen when the Trust is not properly constituted:

  1. Certainty of Intention
  2. Certainty of Subject Matter
  3. Certainty of Objects
  4. The Issues with Uncertainty
  5. How Dixcart can Help

1. Certainty of Intention

Certainty of intention requires clear evidence that the settlor intended to create a Trust i.e. to impose or assume the duty which is characteristic of a Trust e.g. the duty to hold property for or apply it for the benefit of a Beneficiary.

The Courts take an objective approach to determining certainty of intention. The Settlor must manifest an unequivocal intention to impose enforceable duties on the Trustees through their conduct and words (spoken or written).

In the context of an Express Trust the Court will determine intention by identifying the meaning of words used in the provisions of the Trust Instrument (e.g. a Trust Deed or Will). The Instrument will also set out the nature of the relationships and transaction, including any substantive rights and duties created by it. The segregation of Trust Property also indicates intention e.g. creation of bank accounts for specific purpose or earmarking assets for certain Beneficiaries. In this sense, intention is determined in accordance with the maxim ‘substance over form’, meaning that if it possesses the characteristics of a Trust, it is a Trust, despite any labels etc. attributed to the arrangement.

Certainty of intention is the foundation of the whole Trust arrangement, and even where there is a dispute over some issue pertaining to the subject matter or objects it is common for Court to examine whether there was the prerequisite intention to create a Trust at all. After all, a Trust imposes a duty; it is improbable that an individual intended to impose a duty if it is so vague that the Trustees tasked with fulfilling it cannot ascertain what is required of them.

Without a clear intention, a purported Trust may fail and be considered a mere gift or a non-binding moral obligation. For instance, where the assets are gifted into Trust, but the Settlor retains control over the Trust Property it may fail for still be considered to form part of the Settlor’s Estate and therefore be distributed in accordance with their Will or intestacy rules.

In the case of an Express Trust, the existence of an instrument such as a Trust Deed is evidence of the intention to create a Trust. Where a Professional Trustee is engaged, the drafting should provide the Settlor with certainty.

2. Certainty of Subject Matter

The certainty of subject matter comprises of two distinct elements:

  1. Trust Property: It must be possible to identify the Trust Property.
  2. Beneficial Entitlement: It must be possible to ascertain the Beneficiary’s interest in that Trust Property.

Trusts are characterised by two principal features, a duty and a right to property.

The duty to hold the Trust Property for Beneficiaries or apply it for their benefit is meaningless where the Trust Property to which the duty relates cannot be identified. Likewise, the Beneficiaries cannot assert their equitable interest in the Trust Property where it cannot be identified.

Generally such issues flow from the description of the Trust Property, particularly where they form part of a larger mass. For instance, where a Settlor declares a Trust over 5 out of 10 of their diamonds, if the specific diamonds are not identified or earmarked, the Trustees will be unable to identify which of the 10 diamonds they hold on Trust and the Beneficiaries cannot identify which they hold rights to. In this example, the diamonds may hold different values (e.g. cut, clarity, weight etc.), they are not identical. This Trust may fail for lack of certainty of subject matter.  

If the Trust Property or the Beneficiaries’ interests are uncertain, the Trust may fail. Uncertainty in subject matter can result in the purported Trust property reverting to the Settlor’s Estate and therefore would be distributed in accordance with their Will or intestacy rules.

In the instance of an Express Trust, generally the Trust Property is transferred to the Trustees when the Trust is formally constituted, and all interests delineated within a well drafted Trust Deed. This ensures that the Trustees know what assets they are managing and to whom they owe fiduciary duties.

3. Certainty of Objects

Certainty of objects ensures that the Beneficiaries of a Trust are clearly identified, or the Trust must provide a clear mechanism for their identification. Usually, the objects of a Trust will be persons, although in the instance of an Isle of Man Purpose Trust the objects are the permitted purposes of the Trust. The objects of a Trust need to be certain so that the Trust can be regulated and enforced by the Courts where required.

The legal test for certainty of objects differs depending on the nature of the Trust in question. For instance, a greater degree of certainty is required for identifying the objects of a Fixed Trust when compared to a Discretionary Trust, as the objects are certain.

The less stringent test for determining objects that is applied to Discretionary Trusts only requires conceptual certainty, requiring the classes of objects to be clearly defined, but does not have to be a certain list – in such circumstances a claimant would likely have to prove that they are within a defined class of Beneficiary. This different standard flows from the fact that the Trustees’ fiduciary power allows them to determine which objects benefit under the Trust. The objects under a Discretionary Trust have no equitable interest until the Trustee’s discretion is exercised in their favour. The same standard is applied where a power of appointment is given under the arrangement, as the Trustees’ exercise of that power is discretionary.

Certainty of objects ensures that Trustees can execute their duties effectively and that the Trust can be enforced by or on behalf of the Beneficiaries. Without clearly identified Beneficiaries it may also present operational difficulties e.g. improper payments may be more likely because the Trustee does not realise that they are making a payment to the wrong person or because the true objects are not able to prove that they have standing to enforce the Trust and prevent the wrongful payment. Ultimately, without clearly defined objects the Trust could be deemed void for uncertainty.

4. The Issues with Uncertainty

When any of the three certainties is not present, the Trust may be deemed void, potentially causing a number of issues, which can include:

  • Failure of the Trust: Simply, the Trust may not come into existence, meaning that no legal Trust relationship is created. Therefore, the property is not transferred to the Trust and the Trustees do not hold legal title or gain the authority or responsibility to manage it.
  • Reversion of Property: If the Trust is not properly constituted, the property that was intended to be transferred to the Trust may revert to the Settlor’s Estate e.g. it may pass according to the Settlor’s will or the laws of intestacy.
  • Legal and Tax Consequences: There may be legal and tax implications for both the Settlor and the intended Beneficiaries e.g. unintended tax liabilities or the need for Probate.
  • Beneficiaries’ Rights: The intended Beneficiaries may not have any enforceable rights to the property or benefits under the Trust, as the Trust itself does not legally exist.

The appointment of a Professional Trustee provides assurance that the three certainties are present when the Trust is constituted and that all other formalities are met.

5. How Dixcart can Help

Dixcart has extensive experience with all offshore entities and can assist with the setup and ongoing administration of your private client planning and corporate structuring. This includes all forms of Trusts and any underlying Special Purpose Vehicles or corporate entities.

Over the past 50 years, we have developed strong working relationships with some of the world’s leading advisers. If you have not yet engaged a professional adviser, we can facilitate an introduction as appropriate.

PLEASE NOTE: This information is provided as guidance as of June 2024 and should not be considered advice. Where you are considering the establishment of any entity you should always seek professional advice before acting.

Get in Touch

If you would like to discuss Professional Trustee services, or how Dixcart Isle of Man can assist with your Estate or Succession Planning, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Using an Isle of Man SPV for Financing International Investment

Posted on | by Charlotte McGonigle

We have now had an extended period in which world markets have been shaken by international events. For example, the value of the British Pound (£GBP) has been depressed (albeit showing signs of recovery due to Bond market performance) owing to a blend of home grown and global economic forces (Brexit, pandemic, war, inflation et al). But in this fiscal adversity lies a potentially lucrative opportunity.

It may be an opportune time for those based in the world’s more buoyant economies to look to international investment, monopolising on weakened currencies, undervalued markets, and any differences in interest rates etc. But for many with the resources to undertake such activity, such as Family Offices, Private Equity Funds or even HNWIs with significant assets, the question of how best to leverage this advantage can be complex and unwieldly, even resulting in decision-making paralysis – worse, this inertia could even lead to missing the boat altogether.

At Dixcart, we work with a wide range of professionals to deliver solutions for such clients. In this article we consider how you and your advisers could utilise an Isle of Man Special Purpose Vehicle (SPV) to unlock your next international investment opportunity:

  1. Why is the Isle of Man a Good Choice for Your Special Purpose Vehicle?
  2. Which Isle of Man Entities are Available to Act as Special Purpose Vehicles?
  3. Leveraging Against Your Existing Portfolio
  4. What Loan Facilities are Available to an Isle of Man Special Purpose Vehicle?
  5. How Could an Offshore SPV be Used for International Investment?
  6. How Can Dixcart Assist with Your Next International Investment?

1. Why is the Isle of Man a Good Choice for Your Special Purpose Vehicle?

Typically, an offshore SPV will be utilised to ringfence assets and liabilities in relation to a given activity or objective, thus mitigating risk. For example, to purchase an equity position in a company, to conduct mergers and acquisitions, provide angel investment to a start-up, securitisation of debt, raising additional capital, purchasing luxury assets etc. Structuring your investment vehicle in this way can have the broad effect of:

  • Protection against insolvency via ringfencing the assets and liabilities of the Beneficial Owner and SPV.
  • There may be no audit requirements where the SPV is below the earnings threshold.
  • Providing commercial privacy, dependent on the local regime e.g. there is no requirement for accounts to be made publicly available in the Isle of Man.
  • Can shield the SPV from legal action taken against the Beneficial Owners and vice versa.
  • Providing legal and tax certainty dependent on the jurisdiction of establishment.
  • And more…

Further to this, several features make the Isle of Man an attractive prospect for incorporating your SPV when undertaking international investment:

Tax Regime

The Isle of Man has a favourable tax regime for corporate entities, which makes it an attractive location for incorporating SPVs geared towards investment. Famously the island benefits from the following headline rates:

  • 0% Corporate Tax
  • 0% Capital Gains Tax
  • 0% tax on most Dividends and Interest payments

Further, the Isle of Man falls under the UK’s VAT regime, which can be beneficial in certain circumstances. Isle of Man Entities can register for VAT purposes, and benefit from service providers’ experience in this regime and a more responsive VAT Office generally.

However, it is important to note that there may be tax payable in the local jurisdiction where the activity is taking place depending on the nature of the proposed activity and the local tax rules. This is a complex area, and it is vital to engage an appropriate tax adviser when conducting such planning. Dixcart have a wide range of professional contacts and can make introductions as desired.

Legal Regime

The Isle of Man has modern and flexible corporate laws that allow for the creation of various types of SPV. The legislative environment is also politically agnostic, and therefore stable and reliable. The flexibility offered, allows SPVs to tailor their structures to meet their specific objectives, whilst the enduring nature of the legal regime provides certainty.

Additionally, whilst UK Case Law is persuasive, Manx Law is distinct and will only follow the Precedents of the Courts of England & Wales, in the absence of Manx authority. Further, foreign Court Orders are not directly enforceable without an equivalent Manx Court Order. As the Courts and laws of the Isle of Man are tailored to its requirements, it is particularly well placed to deal with matters relating to Company Law, Trust Law, and Tax etc.   

In addition, lenders can take comfort as registered legal charges are publicly available on the Isle of Man Companies Registry search. For example, this is a requirement for companies formed under the Companies Act 1931. Therefore, details regarding all existing registered charges are available to the lender online, on-demand.

Global Standing

The Isle of Man is OECD ‘Whitelisted’ and therefore regarded as a well-run financial centre. The island has a global reputation for being a well-regulated jurisdiction with a stable political and economic environment. The Isle of Man Financial Services Authority has a proactive approach to regulating financial services, ensuring good governance, which provides investors and lenders with confidence in the enterprise. This can make activities such as debt financing more attractive to lenders, as the Isle of Man is easy to do business with.

Regulated Professional Services

The Isle of Man has a heritage in international planning and offers a well-developed financial services industry, including highly experienced service providers, such as Dixcart, who can assist with the setup and ongoing management of SPVs. Further, the investor and lender can take comfort from the fact that Isle of Man corporate service providers must possess a license and are regulated, unlike their UK counterparts.

Proximity

The Isle of Man is located in the middle of the Irish Sea, between the UK and Ireland, making it easily accessible from both locations. But more importantly, operates in the same time zone as the UK and is just +1 CET for European activities. This proximity makes it a convenient location for individuals and companies looking to set up SPVs for access to markets in similar time zones, such as the UK or other European jurisdictions.


2. Which Isle of Man Entities Are Available to Act As Special Purpose Vehicles?

The Isle of Man offers a wide variety of vehicles to act as SPVs and undertake investment via debt or equity financing. A corporate entity can be incorporated on the island in 48 hours or less for a minimum Registry fee of £100 – quicker times are available for increased Government fees. It is important to note that the incorporation fee does not include the service provider’s onboarding fee.

Appropriate entities include:

Isle of Man Companies Act 2006 Company

The Isle of Man Companies Act 2006 (CA 2006) Company is a modern corporate vehicle that has a great deal of flexibility when compared to a more traditional Companies Act 1931 Company.

There are no thin capitalisation rules on a CA 2006 Co as the company may be incorporated with a single share, which can have a par value of zero. The CA 2006 Co simply requires a Registered Office, Registered Agent and a minimum of one Shareholder and one Director. The Director can be a non-Isle of Man Resident, and Corporate Directors are permitted. No Company Secretary is required.

All charges are deemed to be registerable under the CA 2006 and charges should be registered within 1 month of creation. The CA 2006 provides additional flexibility in this regard, as charges can be registered after this 1-month period. In reality the registration of such a charge will likely be a term of the Loan Agreement and as an SPV, the company is unlikely to have existing charges or trade debts etc.

Limited Partnership with Separate Legal Personality

As stipulated in the Isle of Man Partnership Act 1909, Limited Partnerships require a minimum of two Partners, made up of one or more General Partners (GP) and one or more Limited Partners (LP). A minimum of one Partner must be Isle of Man Resident.

A GP has unlimited liability and is free to engage in the day-to day management of the Limited Partnership i.e. administer the investment(s). The GP can be a Corporate entity. Due to this uncapped liability, the GP is typically an Isle of Man Limited Company.

The LP would be the investor, whose liability is fixed at outset and restricted to the capital or property contributed or outstanding. Conversely, the LP cannot engage in the day-to-day administration of the Partnership, lest they be deemed a GP and therefore be exposed to unlimited liability.

Further, under the Limited Partnership (Legal Personality) Act 2011, the Limited Partnership can be incorporated with separate legal personality, thereby being capable of contracting and being a party to legal action.

The Limited Partnership is a transparent entity for tax purposes and therefore Gains are realised on the Partner’s personal rates of taxation (e.g. income tax, Inheritance Tax etc.).

Protected Cell Company (PCC)

A Protected Cell Company (PCC) operates as an independent legal entity, equipped with the authority to engage in contracts, assume ownership of assets, and be subject to legal action. The structure of a PCC allows for the creation of an unlimited number of separate Cells. Each of these Cells serves as a compartmentalised unit with its own assets and liabilities, which are distinctly isolated from those of the other Cells and the PCC’s non-cellular assets and liabilities.

Alongside the non-cellular ordinary shares of the PCC, cellular shares can also be issued. The holder of these cellular shares is permitted to participate in the activities of the specific Cell they invest in, with rights outlined by the Articles of Association.

Accounting transparency is ensured by requiring a separate set of accounts and a tax return for each Cell. Moreover, each Cell must be clearly identifiable as part of a PCC, and all third parties transacting with a Cell must be aware of its status within a PCC structure.

The PCC model presents a valuable strategy for a Beneficial Owner aiming to delineate different activities and associated risks. For instance, one might isolate borrowing and financed activities conducted in one Cell from the private investment carried out in another. When a corporate investor such as a venture capital fund engages in multi-jurisdictional activities, like investing in startups, the Cells act as tangible barriers, segregating each business’s activities. They could also be tailored to reach maturity at varying dates, providing added flexibility.

Honourable Mentions

There are of course many more legal structures available to act as SPV, including; Limited Liability Companies, Foundations and Isle of Man Purpose Trusts. Each has distinct features that can make it appropriate in the correct context.

Economic Substance Considerations

It is important to note that there are rules around Economic Substance in the Isle of Man and Channel Islands. Incorporated entities in these jurisdictions, that undertake Relevant Sector Activity, will have to meet certain requirements to demonstrate the Core Income Generating Activity (CIGA) of the company occurs within the jurisdiction (Isle of Man or Channel Islands), to be Tax Resident. CIGA includes activity such as the entity being directed and managed in the jurisdiction, possessing an adequate and proportionate number of qualified employees (or working hours taking place) in the jurisdiction, possessing an adequate physical presence etc.

For example, if a corporate entity’s sole function is to acquire and hold equities, and the equities in question are controlling stakes in other companies, it is defined as a Pure Equity Holding Company for the purposes of Economic Substance. If the Pure Equity Holding Company derives income from this activity, it will have to demonstrate CIGA. This is accomplished via the provision of Directors, various management services and Registered Office on the Isle of Man or Channel Islands.

You can find the Isle of Man and Channel Islands guidance note on Economic Substance here.


3. Leveraging Against Your Existing Portfolio

As noted in the introduction, markets are tough at the moment and for those with money tied up in their portfolio, liquidating may not be in their best interests e.g. it may compound any losses. Considering debt financing your next international investment can be a good solution under the correct circumstances, but how do you unlock the value in your existing portfolio without compromising growth?

In today’s world it is commonplace for investors to arrange asset-based financing against less conventional security. For example, loan arrangements such as Lombard lending provide a credit facility secured against the investor’s more liquid personal investments, such as equities, bonds, or funds. The methods of how such facilities operate are discussed briefly in section 4.

Further, having initially started in the USA, specialist lenders have started to emerge across the world who can consider more complex arrangements that take into account Illiquid, sticky, or intangible assets. Such assets often present a challenge to use as collateral for financing as they do not have a readily available market value like liquid assets. As such, lending against these non-traditional asset classes is now made possible via insurances contracts that provide a market value guarantee in the event of default.

Illiquid assets are somewhat more straightforward than sticky and intangible assets. Such arrangements may simply require the creation of a charge over the purchased asset being financed e.g. where an aircraft is being constructed, a charge may be created over the aircraft, thus allowing the lender to take lawful possession in the event of default. It is quite normal for the lender in such instances to also take security over other assets in the borrower’s portfolio, such as the Lombard-style arrangement noted earlier, providing the lender with additional certainty to protect against loss.

It is important to work with a specialist lender or professional adviser when attempting to use such assets as collateral to ensure that you are getting a fair and accurate valuation.


4. What Loan Facilities are Available to my Isle of Man Special Purpose Vehicle?

While the Special Purpose Vehicle (SPV) can raise funds through diverse methods like issuing debentures or debt notes, it has a plethora of other financial strategies at its disposal, including acquiring debt financing through banking institutions or other financial intermediaries. Even though numerous banks operate on the Isle of Man – such as Barclays, RBSI, HSBC, NatWest, and others – the Isle of Man entity is not confined to these financial institutions, and deals can be orchestrated with virtually any global lender, given they meet the necessary compliance standards. A multitude of loan facilities are available in these scenarios, but Carried Interest Facilities, Capital Call Facilities, Margin Loan Facilities, and notably, Net Asset Value (NAV) Facilities are some of the most prevalent.

NAV Facilities, in particular, have witnessed escalating popularity, especially amid the prevailing bearish market conditions, where Beneficial Owners might prefer to avoid liquidating their investments at a probable loss. But what are NAV Facilities?


Net Asset Value (NAV) Facilities

NAV Facilities are a form of secured loan, where the collateral consists of assets from an investment vehicle, like a Private Equity Fund, Hedge Fund, or an investment portfolio. They provide investors the means to borrow against their assets’ value without divesting their holdings. The extent of the loan facility is determined by the ‘Net Asset Value’, which is calculated as the total worth of the packaged assets, after deducting liabilities and debts.

Under these provisions, lenders typically extend a line of credit based on a certain proportion of the Net Asset Value. The loan amount hinges on the lender’s evaluation of the quality and liquidity of the underlying assets, as well as the cash flows and distributions that ascend to investors from those assets.

In most instances, the lender will obtain security over the relevant assets, such as shares in the Master Fund/Feeder Fund or the investment holding vehicle. However, the terms of NAV Facilities can greatly vary, depending on the lender, connected parties, any holding vehicle involved, and the nature of the underlying assets. Additionally, the interest rates could be fixed or variable, and the lender might reserve the right to seize the assets or compel a sale in case of an SPV loan default.

NAV Facilities afford investors easy access to liquidity without compelling them to offload their investments. This, in turn, enables them to leverage new investment prospects promptly, without impacting the compounded growth of their leveraged assets. The loan facility can also cover any ongoing or unforeseen expenses, like redemptions or legal fees, endowing the investment vehicle with an element of stability and resilience.


5. How Could an Offshore SPV be Used for International Investment?

Once the capital has been secured via private funding, loan arrangement etc. there are many ways in which an Isle of Man SPV may be utilised to achieve your financial objectives. Typically these include activities such as packaging assets as securitisation, engaging in structured finance, as an investment vehicle, purchasing a luxury asset etc.

Some of the most common uses we see are:

Investment Vehicle

Whilst an Isle of Man SPV can be used to structure open or closed ended investment vehicles for entities such as hedge funds, private equity funds, or venture capital funds undertaking international investment, simple investment companies are often used for private arrangements. The archetypal investment company will use the Isle of Man SPV to co-ordinate the investment capital from investors in multiple jurisdictions or who are looking to undertake investment activity in a foreign market. For example, the funds may come from Hong Kong, Singapore and any number of equivalent jurisdictions, into the Isle of Man SPV that then purchases the equity in a UK SPV undertaking the build and subsequent leasing or sale of UK Real estate, start-ups or growing businesses, with a view to receiving and accumulating Dividends paid to shareholders for reinvestment.

Purchasing a Luxury Asset

In almost every instance, where a client is seeking to acquire a prestigious asset, such as a yacht or jet, an SPV is the best method of purchase. The exact structuring will be guided by the tax and legal advice but will normally carry many benefits for the Beneficial Owner e.g. limiting liability / exposure, tax planning, potential VAT exemptions or recoverability etc. IOM SPVs are very attractive for those non-EU Tax Resident individuals utilising the craft for personal use, or in some circumstances a blend of personal use and commercial charter.Your Attractive HeadingYour Attractive Heading

You can read more about the various uses and features of Isle of Man Companies here.


6. How Can We Assist with Your Next International Investment?

Dixcart can assist with your international structuring, setting up and administering the offshore structures required by your planning. We work closely with clients and their advisers to ensure that the SPV is managed optimally, to facilitate your objectives.

The Dixcart Group has been delivering high quality offshore services to clients and their advisers for over 50 years, with the Isle of Man office trading since 1989. Over this time, we have developed strong working relationships with some of the world’s leading advisers – therefore, If you have not yet engaged a professional adviser, we can make an introduction as appropriate.

*Please note this information should not be considered financial advice, and we would recommend getting in touch with us via the details provided or discussing with your professional adviser before taking any action.


Get in Touch

If you require further information regarding the use of Offshore SPVs, or Isle of Man structures, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

What is an Isle of Man 2006 Act Company?

Posted on | by Charlotte McGonigle

The Isle of Man Companies Act 2006 (CA 2006) introduced what is commonly referred to as the New Manx Vehicle (NMV). Companies incorporated under the Isle of Man Companies Act 2006 provide a more modern and dynamic form of corporate entity than those constituted under the more traditional Isle of Man Companies Act 1931.

Whilst the NMV has been with us for almost 20 years, clients and their advisers often ask about the CA 2006 Company’s features and when they offer a more appropriate solution. We hope that this short overview offers a starting point, but always welcome any questions clients and advisers may have.

Why Incorporate your Company in the Isle of Man?

The Isle of Man is ‘whitelisted’ by the OECD in recognition of the Island’s commitment and leadership in improving transparency and establishing effective exchange of information in tax matters. The Island is globally regarded as a well-regulated offshore financial centre and enjoys strong relationships with all major banking institutions. Further, the Island offers a blend of business-friendly and politically agnostic government, enduring legislation, reliable Case Law and a very beneficial tax regime. Headline rates of taxation include:

  • 0% Corporate Tax
  • 0% Capital Gains Tax
  • 0% Inheritance Tax
  • 0% Withholding Tax on Dividends
  • The Isle of Man is in a customs union with the UK, and Isle of Man companies can register for VAT in the UK

For more a quick overview of the Isle of Man as a jurisdiction and why it is a great choice for incorporating your international Corporate Structure, please see the video below:

Features of the Isle of Man 2006 Act Company

The Isle of Man Companies Act 2006 offers an administratively streamlined corporate vehicle that significantly reduces the bureaucratic burden of operating an Isle of Man Company. For instance, the Act only requires simplified reporting and minimal meetings to sanction certain actions.

Isle of Man CA 2006 Companies also allow for greater flexibility in their Corporate Governance, for example, there may be a single individual or Corporate Director and there is no requirement for a Company Secretary. However, a Registered Agent must be appointed at all times, which you can read about here.

Further, you can now re-register an Isle of Man CA 2006 Company to a CA 1931 Company.

Common uses for NMV Companies

The CA 2006 Company’s Objects are not restricted, and therefore the entity can undertake any lawful activity required, subject to the Risk Appetite of the selected Trust & Corporate Service Provider.

Whilst the Company can pursue any activity, there some common uses of the NMV:

  1. Equity Holding
  2. Private Investment
  3. Luxury Asset Holding e.g. Superyachts
  4. Real Estate Holding

You can read more about Isle of Man Companies here.

How can Dixcart Assist?

Choosing the right Trust & Corporate Services Provider is vital to the success of your structuring. Dixcart Management (IOM) Ltd is a well-established Trust & Corporate Services Provider that is Licensed and Regulated on the Isle of Man and is a member of the Dixcart Group. The Dixcart Group remains proudly privately owned by the same family after more than 50 years.

Our long-standing industry presence underscores our proficiency in navigating the complexities of corporate management and governance.

Contact us

If you require further information regarding the use of Isle of Man Corporate entities or Trusts, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Offshore Trust Solutions for HNWI’s Moving to the UK

Posted on | by Megan Raguro

Reforming the UK’s Non-Domicile tax regime is an objective contained within the Labour Party’s policy platform. An incoming Labour Government is a distinct possibility at the next General Election, which is due to be held no later than 28th January 2025, but is widely expected to be held during 2024.

Labour have regularly discussed the intention to scrap the current Non-Domicile regime in favour of a modernised scheme for people genuinely living in the UK for short periods.

So, what do High-Net-Worth-Individuals (“HNWIs”) coming to the UK need to be aware of, and what structuring opportunities do they currently have open to them?

In this article, we take a brief look at how Offshore Trusts can be utilised to protect and grow the non-UK wealth of non-UK HNWIs coming to the UK to live and work. We’ll consider:

  1. An Overview of the Non-Domicile Regime
  2. What is an Offshore Trust?
  3. Offshore Trust Solutions for Non-Domiciled Individuals
  4. How Dixcart can Support Offshore Trust Planning?

1. An Overview of the UK Non-Domicile Regime

Domicile is a foundational Common Law concept recognised within countries such as Australia, Canada, India, USA and the UK. Domicile goes beyond nationality, residence or ethnicity and is defined by where the individual is considered to have their permanent home or have a substantial connection to.

An individual can only have one Domicile at any one time, which has relevance in determining the territorial law applicable to various matters such as those relating to areas of taxation, for example,  UK Inheritance Tax.

A UK Domiciliary is subject to UK taxes on their worldwide assets, income and capital gains on an Arising Basis; a system of taxation found in many other countries. In the UK, a person can acquire a UK Domicile in five broad ways, but the three most common are:

  1. Domicile of Origin
  2. Domicile of Choice
  3. Deemed Domicile

Non-Domiciled individuals that move to the UK will remain Non-Domiciled for so long as they have not acquired a Domicile of Choice or become Deemed Domicile.

Whilst the individual remains Non-Domiciled, there is no exposure to UK Inheritance Tax (“IHT”) on non-UK situs assets. Further, those who have a Non-Domiciled tax status can opt to be taxed on a Remittance Basis, which may provide tax efficiencies depending on the individual’s circumstances and in accordance with professional tax advice received.

As such, those Non-Domiciled persons have an opportunity to utilise a respected tax neutral jurisdiction, like the Isle of Man, to structure their non-UK affairs in an efficient manner​​​​ and optimise any potential returns.

As noted previously, the current Non-Domicile regime is likely to be subject to reforms in the medium to long term. For the time being, however, the tried and tested structuring options are available for Non-Domiciled persons to utilise and may be pertinent under any shortened or revised system going forward.

A mainstay of pre-arrival planning for Non-Domiciled HNWIs is the Offshore Trust.

2. What is an Offshore Trust?

A Trust is a fiduciary arrangement whereby an individual (the “Settlor”) transfers legal, but not beneficial or equitable, ownership of property/assets to a person or persons (the “Trustee”) to hold for the benefit of their chosen beneficiary or a class of beneficiaries (the “Beneficiaries”).  

The term, Offshore Trust, refers to a Trust that is settled and managed in a separate jurisdiction from the Settlor’s home country. In the instance of an Offshore Trust for a UK Non-Domiciled individual, this involves the settlement of a non-UK jurisdiction Trust and the appointment of non-UK Trustees. This renders the Trust subject to a foreign legislative, regulatory and/or tax regime, normally providing the Settlor and the Beneficiaries of the Trust with efficiencies.

You can read more about Offshore Trusts here.

The Trustees, often professionals, own and manage the Trust assets in accordance with the Settlor’s wishes and ordinarily for a specific purpose such as family wealth preservation, asset protection or tax optimisation. The Trust Deed details the arrangement and parties, acting as the constitutional document of the Trust.

You can read more about choosing your Professional Trustees here.

Importantly, Trusts are not incorporated entities i.e. they do not possess limited liability or separate legal personality like a company or corporation. For instance, it is the Trustees, and not the Trust, that can sue or be sued, contract with third parties and/or create charges.

3. Offshore Trust Solutions for Non-Domiciled Individuals

According to suitably qualified tax professionals, it is often advisable for High-Net-Worth, Non-Domiciled individuals to defer their UK tax Residency to allow for appropriate wealth planning to be implemented. Ideally, this means that any pre-arrival planning needs to take place prior to the start of the first tax year of UK Residence.

The concept of Clean Capital is particularly important with regards to the Non-Domiciled individuals’ pre-arrival planning. Among other things, Clean Capital describes income and gains received whilst non-UK Resident that can be remitted to the UK post tax residency without a tax charge. After the foreign Domiciliary becomes UK Resident, foreign income and gains arising are not considered Clean Capital and may be taxable on remittance to the UK.

In practice, the individual has a number of options open to them regarding the protection and investment of their non-UK assets, one of the most flexible that we regularly assist clients with, is the establishment of a Protected Trust, which can play an integral role in both pre-arrival planning and for those nearing deemed domicile status.

Protected Trusts

Introduced in 2017, a Protected Trust is a Trust settled by a Non-Domiciled individual before becoming Tax Resident in a new country. The main aim of such a Trust is to protect the foreign Domiciliary’s overseas assets from the tax regime of their new country of Tax Residence.

This structure normally involves the incorporation of an underlying Holding or Investment Company to undertake the active management of those settled assets.

It is common for the Trust to be settled with a nominal amount of cash initially, and for the remainder of the Clean Capital to be loaned to the Trustee by the Non-Domiciled individual. Thereby allowing the Trust Fund to be invested in non-UK situs assets and the foreign Domiciliary to receive loan repayments of Clean Capital without a tax charge on remittance. This is also true of any growth or income derived from these assets, which is also considered Clean Capital.

Further, provided that UK-source income is avoided, income and gains within the Protected Trust can compound free of tax, whilst the Trust falls under the Protected Settlement Regime. In principle, this will continue for so long as the Settlor remains Non-Domiciled, and the Trust Fund is not tainted.

If you would like to find out more about the nature and scope of Trusts, and common pitfalls, we have created a series of helpful notes on Isle of Man Trusts for your reference:

  1. Offshore Trusts: An Introduction (1 of 3)
  2. Offshore Trusts: Types and Uses (2 of 3)
  3. Offshore Trusts: Misunderstandings, Pitfalls and Solutions (3 of 3)

There is also this companion video presentation:

4. How Dixcart can Support Offshore Trust Planning

The Dixcart Group have been serving international clients for over 50 years and the Group remains proudly, privately owned by the same family. Our office in the Isle of Man has been in operation for over 30 years, reflecting our expertise and experience as professional Trustees and Corporate Service Providers.

The Isle of Man is a highly regarded OECD whitelisted jurisdiction with a long running track record in fiduciary and professional services. The Island is a centre of excellence for Private Client structuring and is particularly well suited to establishing Protected Trusts for people moving between jurisdictions, including moving to the UK.

At Dixcart Isle of Man, we specialise in services for HNWIs seeking to establish Trusts. Our approach to business is focused on maintaining high-quality, long-term client relationships, prioritising bespoke service over the quantity of clients we have.

Our Isle of Man team comprises of qualified Trust professionals and experienced senior staff, who are tax aware and always on hand to offer comprehensive support in actioning your Trust planning at every stage.

Get in Touch

If you would like to discuss how our Isle of Man office can support your Trust and Corporate planning, please get in touch with Paul Harvey or Glenn Blevins via: advice.iom@dixcart.com

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Malta

Moving to Malta – Using the Isle of Man to Structure Your Assets Efficiently

Posted on | by Charlotte McGonigle

Located in the heart of the Mediterranean, between the north of Africa and southern Europe, Malta is a modern international commercial hub with a global draw.

Malta boasts a diverse economy with well-developed Financial Services, Fintech, Science and Technology, eGaming, Maritime Services and Aviation sectors. Additionally, the island offers extensive Residency routes available, Schengen area status, fantastic travel links and potentially beneficial tax regime. For these reasons and many more, Malta is a destination of choice for wealthy families, entrepreneurs and businesses around the world. 

Malta offers people relocating to her shores a very attractive Non-Domicile regime that provides individuals with a great deal of flexibility when it comes to structuring their financial matters – this is precisely where the Isle of Man can offer clients a platform for optimising their wealth.

In this article we take a brief look at how Dixcart can assist with moving to Malta and how those individuals can utilise the Isle of Man to protect and grow generational wealth, covering:

  1. How to Become a Maltese Tax Resident?
  2. What are the Tax Rules of the Maltese Non-Domicile regime?
  3. How Maltese Non-Domicile Individuals Utilise the Isle of Man for Wealth Planning?
  4. How Dixcart can Support your Move to Malta & Wealth Planning Goals

1. How to Become a Maltese Tax Resident?

There are two distinct groups of people when we consider the method of becoming Malta Tax Resident – these are 1) EU / EEA / Swiss Nationals, and 2) Third Country Nationals. Importantly, for the purposes of this article, where either type of individual does not intend to remain in Malta permanently and has no substantial connection to Malta, both groups may be deemed a Tax Resident Non-Domiciled individual. There are also compelling Residency Programmes available to each group which offer the same benefits and broadly have the same requirements.

Malta is a member of the European Union (EU) and European Economic Area (EEA). As such, EU / EEA Nationals can live, work and study in Malta indefinitely without a Visa or Work Permit. Swiss Nationals also enjoy this right. These individuals can apply for the Residence Programme via an Authorised Registered Mandatory, such as Dixcart Malta. The Residence Programme offers a special tax status to successful applicants who meet the requirements.

Third Country Nationals will be required to take part in a programme such as the Global Residence Programme or successful applicants also gain a special tax status and are granted a residence permit which also extends to their dependents, including spouses and children. The special tax status received under either programme entitles the individual to a beneficial flat rate of 15% on foreign source income remitted to Malta, with the possibility of claiming double taxation relief where an appropriate Double Tax Treaty is in place. Income that arises in Malta is taxed at a flat rate of 35%. The beneficial rate is subject to a minimum yearly tax contribution of €15,000.

The Malta Residency Programme and Global Residence Programme requirements include:

  • Applicants must pay a one-time non-refundable registration fee of €6,000 to the Maltese Government. This is reduced to €5,500 where the Qualifying Property Holding is purchased in Gozo or the South of Malta.
  • Not have benefitted from a number of previous or existing Malta regimes.
  • Evidence of a Lease Agreement and Rental Declaration, or Purchase Agreement relevant to a Qualifying Property Holding. A Qualifying Property Holding requires a minimum investment in a Maltese property of €275,000, or €220,000 if the property is in Gozo or the South of the island. In the instance of a Rental Agreement, rent must cost not less than €9,600 per annum, or €8,750 if the property is in Gozo or the South of the island. The property cannot be let or sub-let.
  • Evidence of self-sufficient means of subsistence (e.g. bank statements, pension, secure bonds, etc).
  • Posses a valid travel document.
  • Evidence of comprehensive health insurance OR Certificate of Entitlement issued by the Entitlement Unit. Must provide cover within the EU for the applicant and all dependents.
  • Be proficient in one of Malta’s official languages (English is an official language of Malta).
  • Applicants and dependents over 18 years of age must satisfy the fit and proper person requirements.
  • Submit an Annual Return – with any material changes that affect the beneficiary’s special tax status.
  • Not spend more than 183 days in any other jurisdiction, in any single calendar year.

2. What are the Tax Rules of the Maltese Non-Domicile regime?

Liability to Maltese Income Tax arises in three forms, dependent on the Tax Residency and Domicile status of the individual – these are on a Worldwide, Remittance or Territorial basis.

Ordinary Residents of Malta who are Tax Resident and Domiciled are taxed on their worldwide assets; meaning that all Income and Capital Gains are subject to Maltese taxation regardless of where they arise or are received. This also applies to persons who hold the status of Long-term Resident or are in possession of a Permanent Residence Certificate or a Permanent Residence Card.

Maltese Ordinary Residency status is determined by a question of fact, relating to the length of stay along with personal and economic ties. Factors which the authorities will consider, include:

  1. Permanent or Indefinite Basis: Individuals living in Malta permanently or for an indefinite period are typically considered ordinarily resident.
  2. 183 Day Requirement: If an individual stays in Malta for more than 183 days in a single year they may be deemed Ordinary Resident.
  3. Regularity of Stays: Persons who do not meet the 183-day requirement, but who regularly visit over a long period of time e.g. over 3 years, can also be considered Ordinarily Resident.
  4. Personal and Economic Ties: Establishing personal and economic ties in Malta is a significant factor in determining Ordinary Residency e.g. purchasing a family home etc.

The Maltese authorities do not define Domicile by nationality, but where the individual considers their permanent Home i.e. where the person ‘belongs’, which implies more significant ties than Residency alone. This can be the individuals Domicile of Origin i.e. normally the Domicile of their parents, regardless of the country where the individual is born. An individual may acquire a Domicile of Choice if they take up Residence in a country with the intention of making it their permanent home. However, they do not acquire Domicile status if they intend to return to their country of Domicile or resettle in another someday, even where the period is long or indefinite. No person can be without a Domicile, and no person can have more than one Domicile at the same time.

A person that is an Ordinary Resident but not Domiciled in Malta is taxed under the Remittance Basis, and therefore:

  • All income arising in Malta is subject to tax, regardless of where it is received.
  • Income arising outside Malta is subject to Maltese tax only if and to the extent that it is received in Malta.
  • Capital gains arising outside Malta are not subject to tax, even if they are received in Malta.

Individuals taxed under the Remittance Basis are subject to the special rule providing for a minimum tax liability of €5,000 per annum (this minimum tax is different to the Global and Residence program which is 15%).

Unlike many equivalent Non-Domicile regimes, an individual can remain Non-Domiciled in Malta indefinitely.

This means that where the Tax Resident Non-Domiciled individual can show that monies received in Malta originate from assets held abroad as capital e.g. inheritance, proceeds from the sale of capital assets etc. they will be regarded as remittances of capital and will not suffer Maltese tax.

Dixcart Malta are equipped to provide Tax Advice regarding Maltese taxation and the Maltese Non-Domicile regime. If you would like to discuss how the regime works and any opportunities relevant to your circumstances, please get in touch with Jonathan Vassallo at Dixcart Malta.

3. How Maltese Non-Domicile Individuals Utilise the Isle of Man for Wealth Planning?

The Isle of Man is globally recognised as an international financial centre of excellence, boasting a sophisticated legal and regulatory system, a developed professional services industry and a long running heritage in Private Client and Corporate planning.

The Isle of Man was named ‘Best International Financial Centre’ at the prestigious International Investment Awards 2023, beating off stiff competition from Jersey and Guernsey.

The island is a self-governing Crown Dependency which makes its own laws. The Statute book and Case Law is modern and business friendly yet enduring, with a wide array of corporate entities and Trusts available. The jurisdiction is also politically agnostic and therefore clients can take comfort from the stability and reliability offered.

The island also sets its own tax regime and offers headline rates which include:

  • 0% Corporate Tax
  • 0% Capital Gains Tax
  • 0% Inheritance Tax
  • 0% Withholding Tax on Dividends
  • Isle of Man companies are able to register for VAT, and businesses in the Isle of Man fall under the UK’s VAT regime.

Owing to the attractive neutral tax regime, Non-Domiciled individuals seeking to live and work in Malta can potentially structure their non-Maltese assets in such a way that facilitates optimal growth via a potential nil rate in the Isle of Man, remitting withdrawals of capital to Malta free from Maltese taxation. Jonathan Vassallo at Dixcart Malta can provide certainty regarding the Maltese tax treatment of your potential Isle of Man structuring in this regard.

Taxation is a complex area and professional Tax Advice should always be sought before establishing any offshore structure.

4. How Dixcart can Support your Move to Malta & Wealth Planning Goals

After more than 50 years, the Dixcart Group remains proudly privately owned by the same family. the Group consists of 10 offices in 9 jurisdictions across the globe, including both Malta and the Isle of Man. Dixcart are very well positioned to assist clients and their advisers who are considering moving to Malta and seeking to structure their non-Maltese assets, or participation within a Maltese business, in a tax efficient manner via an Isle of Man structure.

Dixcart Malta are experts in all Residency programmes available and are Licensed to act as Authorised Registered Mandatory for clients wishing to apply for either the Malta Residence Programme for EU / EEA / Swiss Nationals, or the Malta Global Citizenship Programme for Third Country Nationals. Further, Dixcart Malta can provide Tax Advice for those looking to take advantage of the very beneficial Non-Domicile regime within Malta.

Dixcart Isle of Man are a Licensed and Regulated Trust and Corporate Services Provider that has developed an extensive range of services over its 30+ years of operation. Our team on the Isle of Man consists of professionally qualified experts and senior employees who possess a wealth of experience. This means that our Isle of Man office can support your corporate and/or Trust planning, at every stage.

Get in Touch

If you would like to discuss how our Dixcart can support your plans regarding Malta and the Isle of Man, please feel free to get in touch with Jonathan Vassallo of Dixcart Malta or Paul Harvey of Dixcart Isle of Man via:

Dixcart Malta: advice.malta@dixcart.com

Alternatively, you can connect with Jonathan Vassallo on Linkedin.

Dixcart Isle of Man: advice.iom@dixcart.com

Alternatively, you can connect with Paul Harvey on LinkedIn.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Dixcart Management Malta Limited Licence Number: AKM-DIXC-23

Isle of Man

Employee Ownership Trusts: A Summary

Posted on | by Charlotte McGonigle

This Article briefly summarises the potential advantages of an Employee Ownership Trust (“EOT”), and why the use of an Isle of Man Trustee could be beneficial.

We have a far more detailed Article on this topic, if you require additional information: Employee Ownership Trusts: An Introduction.

HMRC Open Consultation

Any discussion regarding EOTs with Non-Resident Trustees must start with reference to the HMRC Open Consultation on this subject, which closed on 25 September 2023. The current rules leave the potential for a Non-Resident EOT to escape UK Tax liability regarding onward sale to third party purchasers. Whilst there is no evidence of widespread offshore EOT abuse, HMRC feel that some refinement of these rules is required.

Although we eagerly await the outcome of the Open Consultation, we thought it would be a good opportunity to revisit the basics of EOTs, their advantages and underline the value that a properly licensed and regulated Isle of Man Trustee can add to bona fide EOT planning.

1. What is an Employee Ownership Trust and Why Use One?

An EOT is a method of facilitating the employee ownership model and involves transferring ownership of a business into a Trust for the long-term benefit of all Eligible Employees.

The UK Government has incentivised transferring a business to its employees via an EOT with notable tax exemptions for the exiting owner. Under an EOT, majority shareholders can sell greater than 50% of the share capital to the Trust, receiving tax-exempt proceeds.

The circumstances and objectives of both the exiting owner and the business will typically determine whether an EOT is an appropriate solution. Common drivers for EOT planning include; where private owners are considering succession planning, to support growth plans and/or upon initiating a new venture.

EOTs should not be viewed merely as tax-planning tools. Their establishment should genuinely benefit the ongoing success of the business and its employees. The holistic benefits are explored in the next section.

2. What are the Advantages of an Employee Ownership Trust?

The most prominent benefits are divided into three main categories, as detailed below;

i) Benefits for the Business

Studies and real-world case studies have shown that employee ownership leads to enhanced trading performance.

Key outcomes for the business include:

  • Lower Absenteeism
  • A Happier Workforce & Increased Staff Wellbeing
  • Lower Staff Turnover and therefore reduced expenses in areas like recruitment
  • Faster Employment Growth
  • Increased Productivity
  • Better equipped to handle challenging market conditions as the workforce has an ‘owner’s mindset’
  • No third party acquisition, therefore the existing culture, values, and operations are preserved
  • Acts as a natural catalyst for succession planning

ii) Benefits for Owners

Exiting owners have compelling incentives to sell to an EOT, chiefly the potential for a Capital Gains Tax exemption on the disposal of their shares (a saving of up to 20%).

An internal sale process, through an EOT, also offers numerous practical advantages:

  • No need to find an external buyer
  • The sale price aligns with an independent market valuation, avoiding lengthy third-party negotiations
  • Pre-determined Sale and Purchase Agreement offers opportunity to tailor terms
  • Involving employees in the transition process, especially incoming Board Members, ensures a seamless handover
  • Transitioning to an EOT acknowledges the workforce’s contributions and preserves the owner’s legacy

iii) Benefits for Employees

All Eligible Employees benefit from the company shares, held in their name, through the EOT. As such, EOT-owned businesses offer both financial and non-financial advantages to their employees.

Employees can access a tax-free bonus of up to £3,600 annually.

Beyond the bonus, Eligible Employees have a voice in the business and can benefit from future profit-sharing once the EOT’s funding commitments are met. This longer-term financial incentive means employees can benefit from the business’ growth, driven by improvements in their increased engagement and commitment, in turn leading to greater trading performance.

3. Why Use an Isle of Man Trustee for your Employee Ownership Trust?

Professional Trustee Option for Employee Ownership Trusts:

Selecting a Professional Trustee for your EOT fundamentally addresses various concerns related to trust management and risk mitigation; we consider the pros and cons of Lay and Professional Trustees in this separate article.

The general issues regarding the appointment of Lay Trustees include lack of Trust expertise, conflicts of interest, the administrative burden of meeting obligations, the requirement to be objective and independent in the exercise of their duties and a need to maintain a legal and regulatory awareness.

Choosing a Professional Trustee removes all of these pitfalls and safeguards the EOT from potential mismanagement and legal non-compliance.

Isle of Man Professional Trustees for Employee Ownership Trusts

As at time of writing, no Inheritance Tax (IHT) charges arise, on the transfer of the exiting owner’s shares to an EOT, and the EOT is also exempt from the IHT Relevant Property Regime. Even where the exiting owner, company and employees are UK Tax Resident Domiciliaries, there is currently nothing to prevent the use of Non-Resident Trustees. In fact, there can be very compelling non-tax reasons for choosing Non-Resident Professional Trustees, such as those located in the Isle of Man. However, it is important to acknowledge that each case needs to be considered on its own merits – as with all things Trust related, one size does not fit all.

Isle of Man Trustees, such as Dixcart, are required to be licensed under the Financial Services Act 2008 and the Regulated Activities Order 2011, ensuring consistent regulatory oversight by the Isle of Man Financial Services Authority. This oversight assures clients that these trustees adhere strictly to best practices in their EOT obligations. Comparatively, UK Professional Trustees require no Licence, and their Trustee services are not regulated.

The Isle of Man is globally recognised as an exemplary international financial hub, boasting a stable political, economic, and regulatory landscape. With deep roots in intricate Trust and Corporate planning, the Island’s financial services sector is populated by seasoned professionals.

The Isle of Man and UK are separated by the Irish Sea, meaning Isle of Man Professional Trustees are truly independent from the EOT-owned UK business. However, The Isle of Man’s proximity and transport links mean that Trustees can promptly attend crucial UK meetings, offering an ideal blend of autonomy and accessibility.

4. How Can Dixcart Help with Employee Ownership Trust Planning?

Dixcart Isle of Man have been assisting with owner-managed businesses, complex Trust arrangements and intricate employee share ownership structures, for over 30 years – therefore, we are exceptionally well placed to assist with Employee Ownership Trusts.

By leveraging Dixcart’s expertise and quality focused services, we can; deliver an effective bulwark between the business and its ownership, providing checks and balances on the business, assurance against conflicts of interest and ensure that the rights and interests of the beneficiaries are always the first priority.

Get in Touch

If you would like to discuss how our Professional Trustee services can augment your Employee Ownership Trust planning, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

If you’d like to read more on  this topic, in greater detail, it’s available here: Employee Ownership Trusts: An Introduction.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority

Employee Ownership Trusts: A Complete Overview

Posted on | by Charlotte McGonigle

The HMRC Open Consultation on the Taxation of Employee Ownership Trusts and Employee Benefit Trusts has just closed as at 25 September 2023 and includes a portion dedicated to the examination of Trustee Tax Residency – particularly the use of Non-Resident Trustees for Employee Ownership Trusts (EOTs).

Whilst there does not appear to be evidence of widespread abuse of offshore EOTs, HMRC feel there is still scope for offshore EOT planning to go beyond the intentions of Parliament and the purpose of the incentives available to EOTs. Therefore, some refinement of the rules may be in order to obviate the potential for escaping UK Tax liabilities that would be otherwise due on subsequent sales to third parties.

Whilst we eagerly await the outcome of the Open Consultation, we thought it would be a good opportunity to revisit the basics of EOTs, their advantages and underline the value that a properly licensed and regulated Isle of Man Trustee can add to bona fide EOT planning.

In this article we cover the following topics:

  1. What is an Employee Ownership Trust?
  2. What are the Advantages of an Employee Ownership Trust?
  3. Why use an Isle of Man Trustee for your Employee Ownership Trust?
  4. How Can Dixcart Help with Employee Ownership Trust Planning?

1. What is an Employee Ownership Trust?

Building upon the Nuttall Review’s recommendations, the Finance Act 2014, enacted by the UK’s Clegg-Cameron Coalition, was designed to incentivise the employee ownership model. Its chief objective was to foster a more responsible, diversified, and consequently, robust economy. A sentiment that has been supported by the current Prime Minister and Chancellor, Rishi Sunak and Jeremey Hunt, who are currently considering reforms to encourage employee ownership in the UK to boost the economy.

This concept is not unique to the UK and broadly similar company models exist all over the world, albeit there may not be comparable tax incentives. For example, the United States’ Employee Stock Ownership Plan (ESOP), France’s Société coopérative de production (SCOP), Australia’s Employee Share Schemes (ESS) and any number of other workers cooperative or share purchase models.

An EOT is one method of facilitating the employee ownership model. EOTs are a restricted form of EBT that is settled by a Company’s Founders or current owners and involves transferring ownership of a business into a Trust for the long-term benefit of all Eligible Employees.

The UK Government has incentivised transferring a business to its employees with notable tax exemptions. Under an EOT, majority shareholders can sell greater than 50% of the share capital to the Trust, receiving tax-exempt proceeds. The agreed sale amount is based on a business valuation carried out by an independent expert. Without a third-party buyer, this amount should reflect what the business can feasibly pay over an acceptable period.

Many owners choose a full 100% sale, while some keep a minority stake in the company for various reasons— ensuring legacy, ongoing income, to pass on the capital to loved ones as part of their personal Estate or even to make the sale more affordable for the business. It is important to understand that any subsequent disposal of retained shares to the EOT will not avail of the tax exemptions. If a minority stake is retained, provision should be made to protect shareholder interests from events, such as dilution.

In essence, the EOT functions as a Trust, comprising a Settlor, Trustees, and Beneficiaries. You can learn more about the basics of Trusts here.

Party to the TrustDescription
SettlorPerson(s) disposing of their Controlling Interest in the Company (i.e. more than 50% of the voting and equity rights).
TrusteesCan be sourced internally from Directors and employees of the Company, or externally by engaging independent Professional Trustees. Some EOTs may call for a mix.
BeneficiariesAll Eligible Employees of the company. This is a term defined within the Act as an employee or office holder of a Trading Company or principal company of a Trading Group. There are strict equality requirements.

The EOT facilitates indirect ownership of the Company’s shares. While Trustees legally own the shares, eligible employees hold the equitable title, enabling them to benefit from dividends, profits, and voting rights without direct share control. This provides benefits like administrative simplicity and increased stability.

EOT planning is undertaken for many reasons and circumstances and objectives will typically determine whether an EOT is an appropriate solution. Common drivers include where private owners, whether entrepreneurs or a family business, are considering succession planning, to support growth plans or upon initiating a new venture. However, EOTs should not be viewed merely as tax-planning tools. Their establishment should genuinely benefit the ongoing success of the business and its employees. The holistic benefits are explored in the next section.

2. What are the Advantages of an Employee Ownership Trust?

Driven by the UK Government and promoted by organisations like the Employee Ownership Association, employee ownership is now the UK’s leading SME ownership model. In 2022, there was a 37% increase, with half of all such businesses transitioning since 2021. From just 17 in 2014, the number of EOTs is now well over 1,000 and includes prominent firms like ARUP Group Limited, Adventure Forest Group Limited (Go Ape), and famously, the John Lewis Partnership PLC.

There are many benefits of employee ownership facilitated by EOTs, but simplicity I have divided the most prominent them into three main categories.

i) Benefits for the Business

The UK Government’s promotion of employee ownership stems from a core belief in its power to foster a resilient economy. This is grounded in the Nuttall Review’s assertion that incentivizing employees leads to enhanced trading performance. Key outcomes include:

  • Lower Absenteeism
  • A Happier Workforce & Increased Staff Wellbeing
  • Lower Staff Turnover
  • Faster Employment Growth
  • Increased Productivity

The EOT model speeds up employee engagement, typically translating into increased profitability and reduced expenses in areas like recruitment. It also improves the Company’s resilience, better equipped to handle challenging market conditions because the workforce now has a direct stake in the outcome, or an ‘owner’s mindset’.

Selling to employees via an EOT means the business’s existing culture, values, and way of operating can be preserved. In contrast, an external third-party might seek to integrate or change the business to fit their own strategies or corporate culture – possibly even placing the existing employees at risk of an exercise in rationalisation or contract renegotiations. This continuity is especially valuable for SMEs where the founding owners have played pivotal roles in the company’s governance, strategy, and overall trajectory from inception. Further, many SMEs do not have a comprehensive succession plan; EOT planning can often serve as a timely catalyst for undertaking succession planning, preparing the next generation of leadership for their roles.

The bespoke nature of an EOT sale offers a great deal of flexibility, from financing options to handover periods. Often, the sale price is spread over several years and is paid out of the business’s profits. Depending on the circumstances, this may also allow the Company to gear in a way that better aligns with the long-term interests of the business and its employees e.g. speeding up the route to profit-share by limiting the levels of debt financing required.

In essence, an EOT, under apt circumstances, is a robust strategy to ensure a business’s enduring success and stability.

ii) Benefits for Owners

Exiting owners have compelling incentives to sell to an EOT, chiefly the potential for a Capital Gains Tax exemption on the disposal of their shares.

This saving of up to 20% is particularly compelling in the face of a reduced Business Asset Disposal Relief (previously named Entrepreneurs’ Relief). The cumulative limit on the lifetime allowance has fallen from £10m to £1 million for qualifying gains flowing from disposals on or after 11 March 2020.

An internal sale process through an EOT offers numerous practical advantages:

  • No need to find an external buyer.
  • The sale price aligns with an independent market valuation, avoiding lengthy third-party negotiations.
  • Pre-determined Sale and Purchase Agreement offer opportunity to tailor terms.
  • Involving employees in the transition process, especially incoming Board Members, ensures a seamless handover.
  • Transitioning to an EOT acknowledges the workforce’s contributions and preserves the owner’s legacy.

This approach provides the exiting owner clarity and certainty on aspects that there is typically less control over in traditional trade sales, such as the transaction terms, sale price, and exit date etc.

The arrangement of funding for the EOT sale can also be highly customised. Options include seller financing, external debt financing, engaging investors, or using the company’s retained earnings; a hybrid approach is common to optimise the outcome for all. However, the method of financing requires careful consideration and should ideally be advised.

In the right circumstances, an EOT sale offers owners an efficient exit strategy, granting more control over the sale, whilst also ensuring a lasting legacy.

iii) Benefits for Employees

All Eligible Employees benefit from the company shares held in their name through the EOT. As such, EOT-owned businesses offer both financial and non-financial advantages to their employees.

First and foremost,under the Finance Act 2014, employees can access a tax-free bonus up to £3,600 annually. The conditions for this bonus, as defined in s312B of the Income Tax (Earnings and Pensions) Act 2003, include:

  • Participation Requirement: All employees, including those overseas, and in any company within a group structure, must be eligible for any qualifying bonus award at the point the award is determined.
  • Equality Requirement: Employees must participate on the same terms. Variables like remuneration, service length, and hours worked can determine the qualifying bonus. The equality requirement is infringed if the scheme wholly or mainly benefits directors or top earners.
  • Office Holder Requirement: Within an individual company payments will not be qualifying if directors or office holders and other employees connected with them exceed 2/5 of total employees.

HMRC’s Open Consultation considers key issues regarding the Income Tax-free bonus. Notably, the Employee Ownership Association points out that due to inflation, the real value of this tax-free bonus has decreased since 2014. They suggest a current appropriate limit should be £4,600+.

Beyond the bonus, Eligible Employees have a voice in the business and can benefit from future profit-sharing once the EOT’s funding commitments are met. This longer-term financial incentive means employees can benefit from the business’s growth, driven by improvements in their increased engagement and commitment, in turn leading to greater trading performance.

While the EOT benefits all Eligible Employees, the strict requirements do not prevent the business running other initiatives. For example, provision can be made for key staff to directly buy company shares outside of the Trust. This offers more individualised approach to recognition, aiding talent retention.

It is vital that employees are well-informed about the EOT and the incentive structure. The business should take a proactive approach to education, which can include regular communication from the Trustees and management regarding timelines and mutual benefits.

The business can choose to establish an Employee Council to facilitate optimal communication between the workforce and Trustees. The Employee Council represents the interests of the Eligible Employees, giving them a voice and a means to be informed about and influence the EOT’s activities. Specific rights and powers can be reserved for the Council within the EOT’s constitutional documents. For example, the power to veto certain actions, approve certain decisions or have the right to be consulted on certain matters. Alternatively, the Council’s role might simply be advisory in nature.

Finally, trade sales to external parties can be fraught with uncertainties. Conversely, the transition to an EOT is more straightforward as the employees are the purchasers, and they already possess a deep understanding of the company’s operations, culture, and vision, ensuring business continuity and hopefully stable growth.

In the appropriate context, transitioning to an EOT offers advantages not just to the business and the exiting owner, but also to all Eligible Employees. This structure can address talent retention and inflation-related wage concerns, promoting a resilient economy and a more equitable society.

3. Why use an Isle of Man Trustee for your Employee Ownership Trust?

The Trustees appointed to administer the EOT will hold Legal Title to the EOT Shares and owe the Beneficiaries a blend of Trustee Duties and Fiduciary Duties. These legal duties can be onerous and carry a level of liability. Particularly pertinent duties that must be considered, include:

  • To maintain and act in the interest of the Beneficiaries
  • The requirement to avoid conflicts of interest
  • To exercise reasonable care and skill
  • To understand and carry out their obligations in line with the terms of the Trust
  • To act fairly and with impartiality in their capacity as Trustee

While it’s common for EOT Trustees to be individuals or an external Professional Trustee, some businesses opt for a SPV to serve as a Private Trust Company (PTC). When this route is chosen, Trustees become the Directors of the PTC. While the PTC structure offers Limited Liability, safeguarding the Trustee Directors’ personal assets from legal action targeting the PTC, it does not provide an absolute shield. For example, in cases of criminal liability, failure of Fiduciary Duties or Gross Negligence etc. the Trustees can face personal, or even joint and several, liability.

Acting as a Trustee is a serious undertaking that can be complex and must be fully understood prior to appointment. Selecting the right Trustees for an EOT is crucial due to the potentially long-term nature of the appointment. Typically, candidates can be categorised into Lay Trustees and Professional Trustees. You can read more on the general differences between Lay and Professional Trustees here.

Lay Trustee Options for Employee Ownership Trusts:

Employee Trustees may be considered for as they are well placed to direct insight into the day-to-day operations and challenges of the business, bridging communication between the workforce and the Trust. Further, this appointment can provide an opportunity to develop talent to form part of the wider succession plan. Therefore, an Employee Trustee may add value in strategic decision-making and potentially promote an EOT-aligned culture, whilst preparing them for future responsibilities.

Businesses often also consider appointing Board-level Trustees. In particular, Non-Executive Directors can offer a balanced perspective on the strategic mind of the company, providing Board representation for the Trust and acting with increased independence.

Exiting owners may also be inclined to take up Trustee roles or appoint close associates, anticipating a retention of influence over the business. While this can initially seem logical, especially for Founders who deeply care about their company’s trajectory, it carries pitfalls. Ongoing control and influence for the exiting owner can hinder the business’s evolution and negate the genuine benefits of transitioning to an employee-owned model.

The HMRC Open Consultation considered exiting owner appointments and recommends limiting the participation of former owners and their close associates to a minority role. Any breach of this after disposal would be a disqualifying event, leading to an immediate CGT Tax charge to the trustees, or the former owner if within the first year following disposal.

However, the appointment of any Lay Trustee isn’t without challenges:

  • Trust Expertise: Lay Trustees might not have prior experience in Trust governance, fiduciary duties, or corporate oversight which require training and ongoing CPD commitments. This could mean a steeper learning curve, which can lead to errors or inefficiencies.
  • Conflicts of Interest: Employee or exiting owner trustees may find themselves in situations where the best interests of the Trust conflict with the immediate interests or sentiments of their colleagues or the Board. For instance, the exiting owner may have personal financial interests or other agendas that could conflict with the best interests of the Eligible Employees or the business’s long-term success. Further, whilst a NED is more independent, they are still employed by the company and far closer than an external party may ever be.
  • Administrative Burden: Serving as both an employee or NED and a Trustee can be demanding, especially when balancing professional and Trustee responsibilities.
  • Objectivity and Independence: A deep-rooted connection with the business is a double-edged sword. It can aid in understanding nuances but may also hinder unbiased decision-making. Further, where exiting owners or Board Members act alongside employee Trustees, it is important to acknowledge that these parties may tend to dominate important debates and decision-making, owing to strength of character and experience. Further, EOT Trustees will naturally face pressure from members of the business, which can make it difficult to maintain impartiality or to make unpopular but necessary decisions.
  • Legal and Regulatory Compliance: Trust governance often involves complex legal and regulatory responsibilities. Inexperienced Lay Trustees might not be familiar with these areas, potentially leading to non-compliance or legal issues.

Professional Trustee Option for Employee Ownership Trusts:

Selecting a Professional Trustee for your EOT fundamentally addresses various concerns related to trust management and risk mitigation. This choice safeguards the EOT from potential mismanagement and legal non-compliance by employing a third-party specialist whose core focus is trust governance.

A Professional Trustee, being entirely independent, guarantees impartial and unbiased decision-making, which is paramount in safeguarding the interests of the EOT beneficiaries and ensuring robust governance. They play a pivotal role in mediating conflicts, leveraging their extensive experience, and providing a fresh, external perspective to strategic planning.

Equipped with specialised systems and methodologies for efficient EOT management, they devote undivided attention to trust administration, ensuring no conflict with other roles and responsibilities. Importantly, unlike Lay Trustees, a Professional Trustee can deliver a continuous and stable relationship with the EOT in perpetuity, especially when a Trust Services Provider with low staff turnover is chosen, fostering a consistent, long-term business connection.

Isle of Man Professional Trustees for Employee Ownership Trusts

As at time of writing, no IHT charges arise on the transfer of the exiting owner’s shares to an EOT and the EOT is also exempt from the IHT Relevant Property Regime. Therefore, even where the exiting owner, company and employees are UK Tax Resident Domiciliaries, there is currently nothing to prevent the use of Non-Resident Trustees. In fact, there can be very compelling non-Tax reasons for choosing Non-Resident Professional Trustees, such as those located in the Isle of Man. However, it is important to acknowledge that each case needs to be considered on its own merits – as with all things Trust related, one size does not fit all.

Isle of Man Trustees, such as Dixcart, are required to be licensed under the Financial Services Act 2008 and the Regulated Activities Order 2011, ensuring consistent regulatory oversight by the Isle of Man Financial Services Authority. This oversight assures clients that these trustees adhere strictly to best practices in their EOT obligations.

Furthermore, the Isle of Man is globally recognised as an exemplary international financial hub, boasting a stable political, economic, and regulatory landscape. With deep roots in intricate Trust and Corporate planning, the island’s financial services sector is populated by seasoned professionals.

The Isle of Man and UK are separated by the Irish Sea, meaning Isle of Man Professional Trustees are truly independent from the EOT-owned UK business. However, its proximity and transport links mean that Trustees can promptly attend crucial UK meetings, offering an ideal blend of autonomy and accessibility.

4. How Can Dixcart Help with Employee Ownership Trust Planning?

Dixcart Isle of Man have been assisting with owner-managed businesses, complex Trust arrangements and intricate employee share ownership structures for over 30 years – therefore, we are exceptionally well placed to assist with Employee Ownership Trusts.

By leveraging Dixcart’s expertise and quality focused services, we can deliver an effective bulwark between the businesses and its ownership, providing checks and balances on the business, assurance against conflicts of interest and that the rights and interest of the beneficiaries will always be the first priority.

Get in Touch

If you would like to discuss how our Professional Trustee services can augment your Employee Ownership Trust planning, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.