An investigation into alleged abuses of VAT refund rules on aircraft registered on the Isle of Man “remains ongoing”, the European Commission has said.

Proceedings were lodged in November 2018 following media allegations.

A Commission spokesman said the inquiry would not be closed until “we are satisfied that all necessary measures to stop fraud have been taken”.

A UK Treasury review published last week found there was “no evidence” of VAT abuse on the Isle of Man.

The publication of leaked financial documents in 2017, dubbed the Paradise Papers, formed the basis of media reports about offshore tax authorities and the tax affairs of wealthy individuals, which alleged there was “favourable VAT treatment”.

While the island is not a member of the UK or EU, it must apply VAT rules in a similar way, which means VAT can be charged on private aircraft but not on jets registered solely for business.

‘Carefully analyse’

HM Treasury’s review, which looked into whether the way the rules were applied allowed individuals to import private jets into the EU without paying the right amount of VAT, found there was “no evidence” of avoidance.

However, the report noted that the “international nature” of aircraft and passenger transport “can mean that the private use of an aircraft is not always subject to VAT”.

The Commission spokesman said it would “carefully analyse” the findings “before deciding on the next steps”.

An investigation into “similar schemes for expensive yachts” in EU Member States was also ongoing, he added.

A spokesman for HM Treasury said the UK government had formally responded to the Commission “in line with the findings of the review”.

Mr Quayle said: “The European Union will now look at it to see if there are ways of beefing up their own rules.

“And if the rules are altered we will follow.”

Source: bbc.com