There is an old adage that size isn’t everything and that is certainly true of the Isle of Man. While it may be just 33 miles long and 13 miles wide the island has plenty to offer to businesses – not least its tax regime.
Businesses situated on the IOM, which is located in the middle of the Irish Sea, benefit from a simple tax regime. So simple in fact that the standard rate of corporate tax is zero per cent. Yes, that’s right we did say zero per cent. However, there are two exceptions. Banks are taxed at a rate of ten per cent on income from their banking business, while income received by banks that is not derived from their banking business is taxed at the standard rate. And income received by companies that is derived from property and land in the IOM such as mineral extraction, rental and property development, is also taxed at a rate of ten per cent.
There is a standard rate of tax on individuals of ten per cent, a higher rate of 20 per cent. In 2006 the Government introduced a tax cap of £115,000 a year for high net worth individuals.
But it’s not just the extremely competitive tax regime that attracts entrepreneurs. EN spoke to a number of business owners and every single one of them said the quality of life and low crime levels are what makes the island the perfect place to not only run a business, but to live.
House prices on the island are on a par with London and the South East and the latest figures from 2011 revealed an average price of £286,000. There is no capital gains tax, inheritance tax or stamp duty, the latter of which is a huge benefit to those buying property on the island.
With 28 years of growth, the IOM is clearly doing something right. Its diverse economy is home to a range of sectors including financial services, e-business/gaming, aircraft registration, clean and biotech, local food production and space commerce.
It’s worth noting that electricity and fuel costs are slightly higher on the island than those in Britain, but it balances itself out when you consider the savings that can be made as a result of the tax regime.
Miles Pettit, used to work in the film industry in East London, but after growing tired of corporate life he decided to relocate to the IOM to start his own business. He learnt how to make sourdough bread in a bakery in London during his spare time - and set up Noa Bakehouse, a sourdough bakery and coffee shop.
Pettit's parents and in-laws lived on the Isle of Man, so it was an obvious location for the business, he says.
The Department of Economic Development (DED) has a range of initiatives to help those starting a business and this was another thing that attracted Pettit to the IOM.
He received support from the Small Business Start-Up scheme and said not only was he able to receive funding, but also a breakdown of what a small business needs to do to operate on a daily basis.
Pettit, who spent his childhood on the island, says, "The scheme highlighted the differences between setting up a business in the IOM compared with the UK, along with information on employment law, National Insurance and tax.
"It was also a sounding board, as both my wife and I worked for large companies in London and we could bounce an idea off ten to 15 people, but here you don’t have that and have to make choices on your own.
"I make a decision and speak to my business mentor and he advises me and offers support," Pettit adds.
He says that he was able to secure funding of £3,000 as a result and received a grant of £1,500 for equipment, with a further £1,500 issued in stages, to help with living expenses while getting the business off the ground.
"You are not guaranteed that though, it is only if they think your business plan makes sense and if it is a viable business. They also look at your personal status to see if you would be eligible for income support. I think I received something like £50 a week,” he adds.
Phil Taylor, co-founder of Rock Food Concepts, a hospitality business consisting of a restaurant and a cocktail bar, also made use of the Small Business Start-Up scheme.
He received £3,000 in financial assistance and attended a course at the IOM College as part of the initiative.
"The course was designed to help you to write a business plan and is very simple as it is aimed at wide range of people,” he adds.
Phil, who did banking at university, says he found the mentoring offered as part of the scheme useful, but only after he had changed mentors as he felt his first was "just trying to tick boxes".
He ended up with two mentors that he was able to liaise with for 18 months.
"It was a great support and they asked interesting questions that make you re-evaluate your business. It was beneficial having two mentors," he adds.
Katherine Ellis, director of business development at Boston, an independent, privately owned financial services group based on the island, says the firm has a close relationship with the DED as they deal with of a lot of business incubation.
"The DED offers a lot of support. There are new start-up grants available and various apprentice schemes to help small business owners get their companies off the ground.
"The IOM is open for business and is welcoming of new businesses relocating to the island," she states.
Ellis also says that there is a very close working relationship between the public and private sector.
"So for example, if we have a new client establishing a business in the IOM and we are helping them, we can go and meet the assessor for income tax to discuss the tax position.
"We can meet with collector of revenues down at the VAT office and talk through business plans.
"And we can talk to the DED about Government grants, and in the same way as with the banks, we have a relationship manger where we will go and sit and talk through the business plan," Ellis explains.
Sakkie Meeuwsen, founder of Bodystat, a research development and manufacturing company for medical devices in the fitness and wellness industry agrees with Ellis.
Business owners enjoy a close relationship with members of the IOM Government, he explains and when they have an issue or something they need to discuss, can ring the relevant department and actually speak to the minister in charge
Meeuwsen adds, “One of main incentives was safety for my children who were aged ten and 12 at the time we moved. It is a safe and open environment, and of course the tax benefits too. It’s a good place to be.”
Another thing that attracts business owners to the IOM is the work/life balance.
Courtenay Heading is a serial entrepreneur and director of Bladon Jets, which was founded by twin brothers Chris and Paul Bladon, and produces micro-turbines.
He has been investing in early-stage companies for the last 15-years and says that the attractive tax regime was not the main reason for his move to the island. The quality of life was a draw, especially the non-existent commute.
"The two founders had a history in motorbike racing and our chairman raced and won here in a Manx GP in 1983,” he explained. “I came here for the first time in 1991 and became obsessed by bikes and in the Bladon Jets team five of the six are bikers."
"The Bladon Jets chairman, Paul Barrett, moved to the island because he felt it would be a good place to bring his children up. I then decided to come here and the culture of risk-taking played a part in my decision making.
"Entrepreneurs naturally gravitate here."
Jan Tinsley, founder of Coutts House Development, was also attracted to the island by the quality of life and low crime rate while the lack of inheritance tax proved a further incentive.
She describes the island as "beautiful" and “safe”. However, having run a successful business in London, she admits that at times she needs a city fix.
"The secret for comeovers, if you're going to be on the island and want to get off, is to do just that and go and have a break.
"I often get to London quicker than my friends who live in North Wales. When the weather is good, it’s lovely and you make the most of it. It's all very quaint with trams and steam trains.”
Tinsley's two daughters have since moved to the island and they have also started their own businesses with their husbands.
She says she didn't apply for the Small Business Start-Up scheme because she didn't need it, but one of her daughters has since made use of the initiative.
Coutts House is a development of 16 luxury apartments in the former international headquarters of Coutts which cost between £2,000 and £3,000 a month to rent.
Tinsley originally planned to sell the apartments but had to "react to changes in the market" and offer rental packages for the time being.
"We thought that in two or three years we would have sold the apartments off plan, but loan to value is very good.
"It’s tangible and I don’t worry about owning the building. It’s frustrating for my girls as I couldn’t give them help with cash as it was tied up but it helped my daughters to realise their own capabilities when they started their own businesses," she explains.
The development was funded by a mixture of her own funds and investment from Barclays.
Her advice to anyone wanting to develop property on the island, whether that be for commercial or residential purposes, is not to give up as change of use rules can appear tough at first.
"You need to be tenacious. We had some objections here at Coutts House. There was no outside space for the penthouse, and we couldn't change the outside of the building, but we designed something in keeping with the original design and tasteful so we got permission in the end.
"You can’t give up and have to carry on. There still are hoops to be jumped through, but our bank has been completely supportive."
Nigel Taylor, the co-founder of Rock Food Concepts, says he was originally attracted to the IOM for tax reasons, although as his great grandmother lived on the island he had spent many childhood holidays there.
The restaurant, which opened in August 2010, caters for the high-end market and is located in Douglas. Rock Food Concepts currently employs 20 people, although this figure is set to grow as the Taylors are planning to open a third outlet in the near future.
After spending 11years working and living in Hong Kong specialising in claims arising from natural disasters Taylor wanted to start a business but was dissatisfied with England as suitable location.
"Entrepreneurialism is stifled in England by a combination of bureaucracy and excessive taxation and I am concerned that it will get worse in years ahead largely because the economy is in such a poor state.
"The IOM by contrast, has maintained a budget surplus and is legally required to do so and has successfully done so. We have a stronger economy here in the IOM and it is fascinatingly diverse," he adds.
He describes the island’s 28-years of growth, as phenomenal and says that people outside of the IOM do not realise the strength of its economy because those on the island "do not shout about it".
"Other offshore financial centres do a lot more to promote themselves but the IOM doesn't do that, but it should as we have a very good story to tell."
However, Nigel says that starting a business in the Isle of Man wasn't as straight forward as he had anticipated.
Finding a location wasn't easy and in the end he decided to buy a building rather than lease a property because as it was his first business in the hospitality industry he didn't want to commit to a ten-year lease in case the restaurant wasn't successful.
He bought a former bistro and renovated and extended it, but says the planning regulations "were far from laid back".
"Planning wasn't straight forward and you have to get a whole raft of permissions, such as to get an external area requires three separate licenses. We needed planning approval, a pavement license and you have to get your alcohol license extended to cover the defined area. The red tape is considerable.
"I have also built a home on the island and that was very straight forward. I got permission very easily but dealing with commercial premises was a lot more problematic.
Despite this he says he would not change the location of the business.
The Isle of Man may be small but it would appear that there are big benefits to starting a business on the island which go far beyond its competitive tax regime.
By Kirsty Hewitt