The island has been cleared of wrong-doing over its VAT treatment on imported jets.

An investigation by UK Treasury found no evidence of VAT avoidance but said further compliance checks are needed.

In a statement issued at 2.30pm today HM Treasury said: ’ The Isle of Man Government has correctly implemented and administered UK and EU VAT law for aircraft and yachts but should implement additional post-registration compliance procedures to ensure that the right VAT continues to be collected.’

Chief Minister Howard Quayle confirmed the move in a statement of ’considerable public importance’ in Tynwald this afternoon.

He said: ’We have always maintained that the Isle of Man government followed the same UK and EU laws in relation to the importation of yachts and aircraft.

The review was carried out by HM Treasury following a series of allegations of VAT avoidance in late 2017 that emerged following the Paradise Papers expose.

It was alleged that aircraft were being used for leisure by owners who then falsely claimed their plane was being used for business purposes in order to claim the VAT back.

The Manx government invited HM Treasury to carry out the review of its VAT rules and procedures regarding aircraft and yacht importations.

The review, published today, looked into the application of aircraft and yacht VAT rules in the Isle of Man and whether its rules and procedures enabled importation (e.g. by high net worth individuals) of private jets into the EU without paying the correct amount of VAT.

Publication today concludes over a year of intensive investigation by VAT administration experts into this issue.

The report found that UK and EU VAT law had been correctly implemented in the Isle of Man and allegations of widespread VAT avoidance on aircraft and yachts were not upheld.

The report finds that the Isle of Man Government carries out extensive and effective compliance checks during VAT registration but should implement further compliance checks in the years after registration to ensure that the right amount of VAT continues to be collected. The Isle of Man Government has already started to implement improved compliance procedures in light of these recommendations.

The work carried out by HM Treasury has also highlighted the complexity in international VAT rules and the report notes that there may be merit in a wider review of these rules if EU member states and other jurisdictions deem that more tax should be collected on these activities.

In a statement, the Financial Secretary to the Treasury, Jesse Norman said: ’This is a matter of considerable public importance, and the Isle of Man government rightly agreed to a full review.

’I am pleased to confirm that the reviewers have found no evidence of widespread VAT avoidance.

’However, the Isle of Man government is taking action to improve its post-registration checks as a result of the review.

’My officials look forward to working closely with them to provide advice and guidance throughout the implementation and in the future.’