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Jersey horticulture

Jersey, VAT Comments Off

May 152011

A while ago I reported stories in the Telegraph concerning the arrangements made by some major UK horticultural companies to supply plants to the UK from the Channel Islands.

They no doubt had their sources.

I quoted other sources to add to the story – providing sources that seemed perfectly reputable.

However, I have now received a note by email saying some emphasis was wrong with regard to the story about Mr Fothergill and its Jersey supplier. I have no idea what the person sending me the information wanted me to do with it. They certainly did not ask me to publish it. But I think it only fair to do so, in full since they are aggrieved:

Good morning Mr Murphy,

Somebody has recently brought my attention to your recent blog post with regards to Blooming Direct & Mr Fothergills and I have read this article with interest, and with a great deal of frustration at the sheer number of inaccuracies & false statements that you make. I would like you to address these with immediate effect please.

Mr Fothergills has a contract of “cultivation & supply” with the Horticultural business J.R Jersey Horticulture Ltd, not Blooming Direct. J.R Jersey Horticulture is a specialist grower of young ornamental plants. We own our own large scale modern nurseries equipped to grow top quality plants. We are locally owned, managed & produce great quality produce.

Blooming Direct was set up as an independent retailer before Mr Fothergills arrived on the scene, and the concept was formed 2 years previous by myself. My partner & myself do indeed have “many years” experience in this sector, contrary to your questioning. We have over 25 years of plug plant growing & distribution with the Jersey firm, Flying Flowers.

Mr Fothergills approached J.R Jersey Horticulture to grow their plants because they were having big quality issues and wished to have their product grown & packed by the nursery that produces them. As soon as we agreed to produce plants for Mr Fothergills we agreed that it best to de-merge Blooming Direct to avoid any potential conflict of interests what with being a wholesaler as well as a retailer.

J.R Jersey Horticulture Ltd & Blooming Online Ltd (t/a Blooming Direct) are both 100% Jersey owned by Jersey residents.

You state that Mr Fothergills “bought a Jersey business”. This is incorrect.

I note you thank your Jersey sources for their research, perhaps they should get their facts straight before you publish.

I hope that this has given me the opportunity to give you the facts.

Kind regards,

Joel Richardson

JR Jersey Horticulture Limited

I think my second story did, to be honest, show an understanding of all these issues, and certainly made clear that there was a contract for supply with Blooming Direct in place and that it undoubtedly had a business of its own. None the less, I am happy for the clarification to be published. I think if there was error the Telegraph might have made it, but I’m not sure I did. Anyway, I hope matters are put right now.

Equally, I note that answers to two fundamental questions, which were the reason for my blog, have not ben addressed. The first was this comment made by Mr Fothergill’s to the Telegraph:

John Fothergill of Mr Fothergills, one of the handful of large horticultural companies with packing sheds operating out of neighbouring Jersey, accepted that the company was based there purely for tax reasons.

“To be blunt we are here for the VAT benefit and we would have to rethink things if this changes.”

I think that justifies my concern whoever owns the business.

Second, I noted of Blooming Direct, based on a report here, that :

The company is a family run horticultural business and is totally committed to maintaining high standards of quality. Blooming Direct attracted funding support from the States of Jersey (local government) by way of a “Rural Initiative Scheme” aimed at promoting diversification and enterprise within local agriculture and horticulture. This funding has enabled the company to bring quality garden products to their customers in and out of Jersey.

As I then said:

So the States of Jersey went out of its way to help establish a business that would exploit the VAT scheme when local ownership became a condition of its use? And Fothergills reorganised their business by chance at that same time to make sure the ” preferable VAT arrangements already in place were not compromised”? All very odd. And just a coincidence? Or indication that the States was going out of its way to encourage business that exploited this loophole?

I’m not disputing for a moment that the business undertaken is legitimate. But the questions asked are appropriate, I think, given what was going on at the time and the comments made by Mr Fothergill. So clarification is good, but answers to the broader issues raised would be good too.

The Channel Islands’ VAT abuse just goes on and on

Guernsey, Jersey, Tax avoidance, VAT 2 Responses »

May 122011

From the Telegraph:

Under the noses of HMRC and through a scheme administered on their behalf by the Channel Islands Postal Authorities, mail order goods bought from online retailers are being posted to UK customers in packages showing postage costs at 50 times the standard price, while the goods inside are stated as costing only a fraction of their actual retail price.

By reducing the product price to below £18 and shifting the difference onto the cost of postage, which is exempt from VAT, products regardless of their original price become eligible for Low Value Consignment Relief (LVCR) and enter the UK without a VAT charge.

Telegraph Expat has seen a Jiffy bag containing a 16GB flash card arrive from Flash_Memory, a Channel Islands mail order company with labelling that shows a false postage cost of £22 and a false product cost of £17.99.

According to official figures from Jersey Post, the Jiffy bag in which it arrived should have cost no more than 50p to send.

I stress: those are their words re costs.

But if they’re right – and they reproduce the invoice on their site – then the evidence of abuse of the Channel Islands for VAT purposes is growing by the day.

And note who is meant to regulate this for HMRC – the Channel Islands themselves.

Well that was never going to happen.

And the evidence that it’s not doing so looks to be strong.

Channel Islands’ VAT abuse has cost the UK at least £475 million

Guernsey, Jersey, Tax avoidance, VAT 1 Response »

Apr 282011

The House of Commons library has issued a new briefing sheet on VAT abuse involving the Channel Islands. It’s available here.

The main point is that it has cost the UK Exchequer (who are bound to have undervalued this sum) at least £475 million over the last four years.

Now what could that have been used for?

Two new hospitals free of PFI, anyone?

Hat tip to Richard Allen

More on Mr Fothergill’s and Jersey

Guernsey, Jersey, VAT 1 Response »

Apr 252011

The Telegraph highlighted concerns about seed and horticultural companies abusing the Channel Islands’ for VAT purposes yesterday.

Mr Fothergill’s seems to have spent some time and effort on setting up its Jersey tax structure. So much so that it’s advertised as a case study on the web, here.

Note it says that advice was provided on:

ensur[ing] the preferable VAT arrangements already in place were not compromised

But I should add in all fairness that there is some evidence of local sourcing too.

So maybe a case of ‘mix ‘n’ match’ to secure the best tax outcome? It certainly has that feel about it.

I have no problem with locally sourced product using the exemption. It’s the round tripping I object to – and that article did imply it was Thompson & Morgan doing that.

More information would be appreciated.

But one interesting thing: the local Fothergills partner is called Blooming Direct, of which it is reported:

With many years experience in the mail order garden retail industry to offer, Blooming Direct is an evolving family run business, offering a unique selection of plants, flowers and garden accessories. Founded in 2007, the business is situated in St. Martin (Jersey) and also offers a rich source of advice in its popular Gardeners Blog.

That’s an interesting interpretation of ‘many years’.

It’s also odd that the company was set up only three months before Fothergill’s signed an agreement with it. That’s might confidence on their part even if the team were clearly experienced elsewhere.

One other odd thing: the same web site says:

The company is a family run horticultural business and is totally committed to maintaining high standards of quality. Blooming Direct attracted funding support from the States of Jersey (local government) by way of a “Rural Initiative Scheme” aimed at promoting diversification and enterprise within local agriculture and horticulture. This funding has enabled the company to bring quality garden products to their customers in and out of Jersey.

So the States of Jersey went out of its way to help establish a business that would exploit the VAT scheme when local ownership became a condition of its use? And Fothergills reorganised their business by chance at that same time to make sure the ” preferable VAT arrangements already in place were not compromised”? All very odd. And just a coincidence? Or indication that the States was going out of its way to encourage business that exploited this loophole?

What, above all else, this does suggest is that the horticultural industry, for which VAT low value consignment relief was first set up, looks as though it has also joined in exploiting it. And if that’s true that is yet more reason for reforming it.

NB: Thanks to sources in Jersey who researched some of this

You can’t even buy your seeds without VAT abuse

Guernsey, Jersey, VAT 1 Response »

Apr 242011

The Telegraph has reported massive VAT abuse of the Channel Islands’ by horticultural companies – naming Thompson & Morgan and Mr Forhergills in the process.

As they note:

During peak season from March to June, it is not uncommon for 40ft articulated lorries carrying up to 42 trolleys of plants to board the twice daily ferries to Jersey and Guernsey.The goods are then unloaded in packing sheds, repackaged and sent back to UK consumers or kept in greenhouses until ready for sale.

Martyn Langlois, the general manager for Ferryspeed, the company responsible for shipping plants belonging to horticultural company Thompson & Morgan’s plants from the UK to packing premises in Guernsey, said that Ferryspeed’s business with the company was one of its core contracts.

Last year Thompson & Morgan turned over £40 million.

And as they also report:

John Fothergill of Mr Fothergills, one of the handful of large horticultural companies with packing sheds operating out of neighbouring Jersey, accepted that the company was based there purely for tax reasons.

“To be blunt we are here for the VAT benefit and we would have to rethink things if this changes.”

I liked this quote to:

Derek Jarman, director of Hayloft Plants Ltd, a nursery that sells new and unusual plants, paid £400,000 in VAT over the course of last year and said that companies 20 times his size are operating out of the Channel Islands and pay no VAT on goods under the value of £18.

“As a businessman I congratulate these companies on being entrepreneurial. As a person who is conscious about the environment, I am seriously concerned about the amount of fossil fuel which is being used to take garden plants from mainland UK to the Channel Islands to be packed and then sent back immediately to mainland UK consumers.”

“As a Conservative member and supporter, I cannot believe this Government cannot see what is happening. The annual loss of VAT would fund many nurses, teachers and civil servants – the very hardworking people who are currently losing their jobs as the Government is short of money.”

He can see it because it’s staring him in the face.

But all use of tax havens – or secrecy jurisdictions as I prefer to call them precisely because so much of this stuff is deliberately hidden from view – is as pernicious.

Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

It’s time to close them down.

Now.

Even Tories see the sense in that when it stares them in the face. They just need to look a little harder.

They should start here.

How many bureaucrats does it take to stop a light bulb being sold VAT free from the Channel Islands?

Guernsey, Jersey, VAT 1 Response »

Apr 082011

We’ll let you know….

Hat tip: Richard Allen

The Channel Islands shouldn’t rely on kinks

Guernsey, Jersey, VAT 2 Responses »

Apr 082011

OK, sometimes I have to agree with George Osborne. It’s rare. But it happens.

As the Telegarph reports:

Mr Osborne was asked at the British Chambers of Commerce conference on Thursday by the Jersey chamber [of commerce] as to whether he felt the [VAT] relief [that underpins the consignment industry in the island] was a threat to the [UK] economy.

Mr Osborne said: “I don’t think you should allow an industry just to spring up on the back of a kink in the tax system.

So on this occasion I have to agree with him.

Channel Islands’ VAT abuse – good news but not good enough

Budget, Conservatives, Guernsey, Jersey, VAT Comments Off

Mar 232011

The Budget says:

The Government will reduce the Low Value Consignment Relief (LVCR) threshold from £18 to £15 from November 2011. In addition, the Government will explore options with the European Commission to limit the scope of the relief so that it can no longer be exploited for a purpose it was not intended for. The Government will also revisit the level of the LVCR in Budget 2012, if discussions with the European Commission do not produce a workable solution to the problem of exploitation of the relief.

That’s good news.

But it’s not good enough. This allows vast amounts of abuse to continue – on almost all music for example.

Unless the government is intent on stopping the round tripping of goods in the next year then this is token gesturism.

I sincerely hope that is not true.

Isle of Man could always consider income tax

Economics, Ethics, Isle of Man, VAT Comments Off

Mar 212011

Tax News.Com reports:

The Isle of Man government has announced the appointment of Dan Davies as the Transforming Government Programme Director, to drive forward fiscal reforms to reduce government expenditure, required as a result of the revision of the VAT-sharing agreement with the United Kingdom.

Davies will head a central team, resourced from within the government, who will work closely with Departments to deliver substantial cost savings over the next three years in line with targets set out in February’s Budget. Several initiatives are being progressed as part of the package to rebalance the government’s finances following the reduction in the Isle of Man’s share of VAT revenue, under a revenue sharing agreement with the United Kingdom, revised in March 2009. These initiatives will include the introduction of shared service centres, reductions in staff costs and better use of technology.

Of course, none of this is necessary.

The Isle of Man could:

a) Charge income tax on those earning more than £100,000 a year

b) Increase its income tax rate from 20%;

c) Charge tax on companies in accordance with international requirements.

But dogma dictates cuts in services.

I wonder how long people will put up with that?

Will we see people on the streets of Douglas as we will on the streets of London this weekend?