Lost income tax revenue

Summary

The requester asked for estimates of income tax revenue lost since 2011 due to the abolition of the Attribution Regime for Individuals. The Treasury responded that it does not hold this information as no such estimates are collected or reviewed following the regime's abolition.

Key Facts

• The Treasury does not hold estimates of income tax revenue lost through the accumulation of income in zero-rated companies since the 2011 abolition of the Attribution Regime for Individuals (ARI).
• The Income Tax Division does not collect or review information regarding potential revenue loss from this specific mechanism.
• A 2012 consultation on the 2012-2016 Tax Strategy stated that the abolition of ARI was not expected to lead to an actual loss of income tax revenue, though it could affect the timing of taxation.
• The ARI was an anti-avoidance mechanism designed to prevent the use of 0% companies to 'wrap up' investments and defer tax.
• The request was refused under section 11(3)(a) of the Freedom of Information Act 2015 because the information is not held.

Data Disclosed

• 2011
• 2012-2016
• 2 July 2012
• 0%
• 408
• 2009/10
• £2.19m
• 741
• 2010/11
• £3.58m
• 2025-02-11
• 2025-02-21
• 4433965

Exemptions Cited

• Section 11(3)(a) of the Freedom of Information Act 2015 (Information not held)

Original Request

Any estimate made by the Treasury or Income Tax Division, since the 2011 announcement of the abolition of the Attribution Regime for Individuals, of the amount of income tax revenue lost through the accumulation of income by Manx resident individuals in zero rated resident companies that they own or partly own.

Data Tables (1)

Data Tables (reformatted)

Full Response Text

Freedom of Information
Seyrsnys Fysseree

The Treasury Government Office,
Douglas Isle of Man, IM1 3PU

Telephone: (01624) 685605 Email: FOI.Treasury@gov.im

Government Website: www.gov.im

Our ref: 4433965 21 February 2025

Dear ###

We write further to your request received 11 February 2025, which states:

"Any estimate made by the Treasury or Income Tax Division, since the 2011 announcement of the abolition of the Attribution Regime for Individuals, of the amount of income tax revenue lost through the accumulation of income by Manx resident individuals in zero rated resident companies that they own or partly own."

Our response to your request is as follows:

While our aim is to provide information whenever possible, in this instance the Treasury does not hold the information you have requested. Therefore, as previously advised, we need to apply a practical refusal reason to your request under section 11(3)(a) of the Act (information not held). The reason for this is because since the abolition of Attribution Regime for Individuals (ARI) the Income Tax Division do not collect or review information in relation to any possible amount of income tax revenue lost through the accumulation of income by Manx resident individuals in zero rated companies that they own or partly own.

It may be of interest for you to note that whilst we do not hold the specific information you are interested in, we do hold a consultation on the 2012-2016 Tax Strategy, which was published on 2 July 2012, and included the following analysis and background information on the ARI. An extract which refers to the abolition of ARI states 'it is not expected that it will lead to an actual loss of income tax revenue (although it could affect the timing of the taxation of a limited amount of income).' The full wording from the consultation is as follows:

'The ARI, and its predecessor the DPC, were anti-avoidance mechanisms designed to charge the profits of a company even if they were not distributed, or in some cases to encourage distribution. It has been made clear by the EU Code of Conduct that this type of tax system is not compliant with the Code and therefore there cannot be a replacement for ARI. Indeed, any mechanism which would have a similar effect to the ARI, either in statute or in practice, could not be judged compliant with the Code.

However, as the profits of a company have been charged to tax at the standard rate of 0%, it must be ensured that a person cannot receive an income distribution from a company without it being subject to income tax.

The principal objective of the ARI was to deter the use of 0% companies simply to 'wrap up' investments and thereby keep otherwise taxable income in a low tax 'money box'. The ARI appears to have been effective in achieving this objective and, whilst it is very difficult to predict the revenue that will be lost by the abolition of ARI, it is not expected that it will lead to an actual loss of income tax revenue (although it could affect the timing of the taxation of a limited amount of income). Recent Income Tax Division data shows that there were 408 declarations of attributed income in respect of the 2009/10 tax year with an associated liability of £2.19m and 741 declarations with an associated liability of £3.58m for the 2010/11 tax year.'

Please quote the reference number 4433965 in any future communications.

Your right to request a review

If you are unhappy with this response to your freedom of information request, you may ask us to carry out an internal review of the response, by completing a complaint form and submitting it electronically or by delivery/post.

An electronic version of our complaint form can be found by going to our website at https://services.gov.im/freedom-of-information/Review . If you would like a paper version of our complaint form to be sent to you by post, please contact me and I will be happy to arrange for this. Your review request should explain why you are dissatisfied with this response, and should be made as soon as practicable. We will respond as soon as the review has been concluded.

If you are not satisfied with the result of the review, you then have the right to appeal to the Information Commissioner for a decision on; 1. Whether we have responded to your request for information in accordance with Part 2 of the Freedom of Information Act 2015; or 2. Whether we are justified in refusing to give you the information requested.
In response to an application for review, the Information Commissioner may, at any time, attempt to resolve a matter by negotiation, conciliation, mediation or another form of alternative dispute resolution and will have regard to any outcome of this in making any subsequent decision. More detailed information on your right to a review can be found on the Information Commissioner’s website at www.inforights.im. Should you have any queries concerning this letter, please do not hesitate to contact me. Further information about freedom of information requests can be found at www.gov.im/foi.

I will now close your request as of this date.