Ready for take-off

The Isle of Man’s new aircraft registry for business and private planes will provide a cheaper and more user-friendly alternative to the UK model. Timothy Mann investigates

The Isle of Man will shortly launch its new aircraft register. This follows the success of the Isle of Man’s Yacht Register and is expected to be in operation by late spring or early summer 2007.

The new Manx Aircraft Register is aimed at the business and private jet market. As it is not uncommon to find that people who own super yachts also have planes, it is hoped that the two registers will to a certain extent be complementary.

Very light jet aircraft

The launch of the Manx Aircraft Registry coincides with the certification and production of the new wave of very light jet aircraft (VLJs), which are expected to revolutionise private and business jet travel as a result of their greatly reduced purchase and operating costs compared with conventional private or corporate jet aircraft. The most publicised example of this is the Eclipse, currently marketed at a price of $1.53m (£810,000). This is not the only contender in a market that includes Cessna, Adam, Embraer and Diamond.

This does not, of course, preclude the registration of the more conventional type of business jet or turbo prop aircraft, which typically benefit from greater size and payload. Indeed, many experienced operators may prefer to pay more for an established product. Historically, the aircraft industry is littered with new designs, where a development problem has caused the programme to fail or to require expensive remedial work on the early examples of the planes in operation.

The Isle of Man Aircraft Register will accept all planes, irrespective of take-off weight, and which operate in the private category. As such, smaller piston engine aircraft would also be accepted for registration on the Manx Aircraft Register, but the register is not really aimed at such aircraft. This will primarily be of more interest to owners of locally operated aircraft.

The Manx Aircraft Register will be independent of the UK aircraft register operated by the UK Civil Aviation Authority (CAA). The Manx register is being created under a revised Air Navigation Order, which is currently in course of finalisation. There is a general election on the Isle of Man in November, which will bring with it a new Manx parliament, but it is hoped that the new Air Navigation Order will be laid before Tynwald, the Manx Parliament, early in the New Year.

The Manx register will not be a sub-register of the CAA register, and the planes will not carry the familiar ‘G’ prefix to their registration letters. The Manx register has been able to take advantage of a little-known fact: when global registration letters were allocated by international agreement many decades ago, the UK was actually given several letters, including the familiar ‘G’ and, by happy chance from the Manx perspective, the completely unused letter ‘M’. With the agreement of the UK Department for Transport, all Manx-registered aircraft will carry the prefix ‘M’ in their aircraft registration letters.

The new Manx Aircraft Registry is being run by the new Manx director of civil aviation, Brian Johnson. Apart from hoping to charge slightly less in fees than the CAA, Johnson hopes that the registration process on the Isle of Man will be “more user-friendly” than many aircraft registries and avoid what are often perceived as unnecessary frustrations experienced by many people attempting to register aircraft. That is not to say the standards will be low.

Standards

The Isle of Man’s reputation as being a well-regulated jurisdiction has turned out to be a key element in its recent success and Johnson has made it clear that low standards will not be accepted. However, where an aircraft complies with a reputable international standard, it is likely to be accepted without frustrating additional requirements.

The new Manx Aircraft Registry will only accept aircraft operated in the private category. That means that the aircraft cannot be used for hire and reward. This still allows businesses that employ their own pilots to operate an aircraft for their own benefit and the benefit of their staff and the officers and employees of other companies in their group. Aircraft owned by a group of pilot owners, or companies that employ their own pilots, are also likely to be acceptable under group schemes.

For the time being, fractional ownership schemes are not acceptable, as under current European regulations, with which the Isle of Man would have to comply, these would have to be operated in the commercial category. It seems likely that the situation will change in time to allow fractional ownership under the private category rules similar to that allowed under Federal Aviation Administration (FAA) regulations in the US.

Cost

One attraction of the Manx Aircraft Registry is that it will likely allow the validation of existing type-rated licences for crew members of aircraft.

This can lead to a significant cost saving in certain circumstances as it avoids costly retraining of crew. In addition, if US maintenance organisations are approved by the Joint Aviation Authorities (JAA) in Europe or the European Aviation Safety Agency (EASA), then those organisations may be approved for maintenance of aircraft on the Manx Aircraft Registry. This again can have a significant cost implication to some operators.

While many jets are acquired by businesses that can obtain repayment of their VAT, there are still a number of operators anxious to avoid VAT payable on the purchase of aircraft under the eight-tonne exemption limit. The Isle of Man is a jurisdiction subject to VAT. The Danish authorities are known to have a more relaxed interpretation of whether an aircraft under eight tonnes should be subject to VAT. Early indications from the office of Customs and Excise in the Isle of Man are that if an aircraft owner takes advantage of the more relaxed regime in Denmark for the importation of aircraft into the EU, the Manx Customs and Excise authorities will be bound to recognise any VAT exemption obtained in Denmark.

Apart from advantages to owners and operators of business, jet and turbo prop aircraft, there are also a number of other potential advantages owing to the registry’s offshore position. One immediate possibility is that the purchase of an aircraft is an obvious use of offshore funds, allowing the use of an aircraft without the necessity of repatriating funds into an onshore jurisdiction, where they may suffer a tax liability.

Similarly, there are opportunities for offshore financing of aircraft with possible tax advantages. While many banks on the Isle of Man will fund an aircraft purchase on the traditional lines of any high-value acquisition, this form of funding is uneconomic for smaller jet aircraft and turbo props.

A number of local banks are considering the production of a simplified financing package for aircraft in the £1m-£5m category. None of these have reached fruition as yet. There is apparently an opportunity for investment of offshore funds in aircraft financing if such a suitable package could be produced and marketed.

The use of a register for the registration of an aircraft such as the Isle of Man registry brings with it is the availability of registering a charge against an aircraft in a reputable jurisdiction, with a well-developed and experienced court system familiar with dealing with international commercial disputes.

Timothy Mann is an advocate at MannBenham