The Isle of Man has decided to woo new businesses by cutting its main corporation tax rate to zero.

The move will cost the island about �20m a year in revenue.

The advantage is that the island will become a significantly more attractive place to do business than the UK.

British businesses have already been angered by an increase in their tax burden in the latest budget.

Alan Bell, the island's Treasury Minister, said the decision had been taken in order to restructure the island's economy.

But he denied that the decision would attract the wrong sort of companies seeking to evade tax.

Deterring dodgers

Mr Bell said the inevitable outsourcing of traditional manufacturing businesses to the Far East and India would lead to rising unemployment among islanders.

"We now want to stimulate new business to replace those jobs," he told the BBC's Radio 4 Today programme.

He said the island's strong regulatory regime would deter tax dodgers.

The plans were given a cautious welcome by the UK government, which said they appeared to comply with the EU's code of conduct

The tax cuts will be introduced gradually, and be reduced to zero within four years.