The head of foreign direct investing at the Isle of Man government recently spoke to this publication about various regimes in place on the island that could be of interest to high net worth individuals.

A head of department from the Isle of Man government has urged high net worth individuals to invest in small-and medium-enterprises based on the island, in a push to drive innovation and spur economic growth. 

The Isle of Man is constantly looking to entice innovative businesses and start-ups to choose the Island as their home, and this presents an opportunity for high net worth investors to turn a profit, according to John Garland, head of foreign direct investment at the government's economic development department. 

“For high net worth individuals, there is an opportunity to invest alongside the government, or directly, in these companies,” said Garland. “It also presents an opportunity to engage with the Isle's business community. Every high net worth individual I have ever met is intellectually stimulated by promising business opportunities.”

Through various initiatives that fall under the scope of the Isle's wider FDI scheme, the government uses its own reserves to invest in promising companies in exchange for an equity stake.

For example, the government's Enterprise Development Scheme provides up to £1 million of equity and loan support to blossoming businesses, some of which may be looking to relocate to the Isle.

However, unlike typical FDI, which sees investors gain a controlling stake of the company they invest in, the Isle of Man government's stake is not controlling, and will never be higher than 49 per cent, Garland said. 

“It is calculated on a deal-by-deal basis what stake the government takes,” Garland said. “We want to support businesses, not control them. The highest a stake would be is 49 per cent, but I want to highlight that that is a big, big number, and is likely to be far lower.” 

But investors looking to pour their money into promising companies will not receive tax relief, Garland emphasised. 

“We don't have the UK's enterprise investment scheme [which offers tax relief in exchange for investments in start-ups] in place in the Isle of Man,” Garland said. “A lot of [outsider] investment is driven by good deal flow.

“The tax tail doesn't wag the dog here, it is genuinely good business driving the flow [of investment].”

Such initiatives are examples of how jurisdictions such as the Isle of Man, Jersey and Guernsey - UK Crown Dependencies - as well as those on the European continent (Luxembourg, Monaco, Gibraltar) and Mediterranean (Malta, Cyprus) are competing for sources of investment revenue. The departure of the UK from the European Union, and the search by UK-sourced investors/firms for access into the EU's Single Market, is seen as a potential new incentive to be developed by some of these locations.

Innovation hub
The Isle of Man is seeking to solidify its status as a hub for innovation through the government's proactive and agile approach of pushing legislation that supports emerging areas of technology. One example of this came in 2015, when the government remoulded the Isle's Proceeds of Crime Act to account for digital currencies, such as bitcoin, and facilities holding them. 

In particular, the gaming sector generates a significant amount of revenue on the Isle of Man, and is one the government works “side by side” with, Garland said. 

According to a government report, the sector accounted for the largest portion (19.5 per cent) of the Isle's national income in 2014/2015, making it the largest economic sector. During this period, the gaming industry generated £838.5 million, a 22 per cent rise from the figure logged in the government's 2013/2014 report. 

The Isle's gross domestic product, or GDP, swelled 5 per cent year-on-year to reach £4.51 billion.

Garland attributed the evolution of the Isle from a seaside holiday hot-spot into an innovation hub to its sturdy and stringent regulatory regime.

“The Isle of Man is now an international business centre built on foundations of a strong regulatory environment,” Garland said. “Financial services, gaming, biomed and technology are all very strong sectors here, and more participants from these industries are coming to us because they're looking for funding to take their businesses to the next level.”

And although business is already booming, it will continue to prosper, Garland assured. 

“This is just the beginning,” he said. “Once you get a supertanker out of the harbour it keeps on moving.” 

Garland flagged another of the Isle's initiatives, the Alternative Banking Regime, as a catalyst for new business.

The regime, launched around one year ago, was designed to attract banking operations to the Isle, in particular private banks, foreign bank branches and representative offices. 

The government did this by expanding the previous banking, or “deposit taking”, licence to include three sub-categories, each tailored to suit certain types of non-retail banks looking to set up shop on the Isle. 

The regime presents opportunities for ultra-high net worth individuals, Garland said, as a Class 1 (2) licence, for non-retail deposit takers, is available to a “very limited” class of individuals – those whose net worth exceeds £500,000 – and corporates. 

The application fee for this type of licence is £8,950 and it carries an annual fee of £18,750.