As International Tax Review has reported:
Online retailer Play.com has shut down its once profitable Jersey business, which thrived because of the low value consignment relief (LVCR) VAT loophole. The move is a blow to the Channel Islands' economy, but has been welcomed by UK businesses undercut by their offshore rivals.
Play.com will no longer sell directly to customers, becoming more of a marketplace as it makes all of its 147 staff in Jersey redundant and consolidates its operations in Cambridge.
“Moving forward we are intending to focus exclusively on our successful marketplace, which is our main business area, and to phase out the direct-retail part of our business,” a spokesman for the company said.
I think this is a little disingenuous. LVCR closed in April last year. It was blatant and aggressive tax avoidance. It undermined the UK economy, distorted competition, reduced UK tax take, destroyed UK jobs and denuded the UK High Street of shops. It harmed the music industry. And all to make those willing to get round the law better off. And now that it has gone the appeal of Jersey - which I and others like Richard Allen at RAVAS always said was completely artificial and solely taxed based - has gone.
So be it. I'm sorry for those who have lost their jobs. I am more sorry for the harm caused before LVCR was stopped. Tax abuse costs people everywhere their jobs, their futures and their public services. It's time that was appreciated. This case proves it.
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Its the Guernsey Marmalade industry all over again. Here today gone tomorrow
http://www.dailymail.co.uk/femail/article-1298350/How-Monty-Don-dug-family-secrets.html
We disagree on many matters, Richard, but you are quite right on this. Many congratulations on your successful campaign.
Play.com was set up by 3 Jersey born and bred residents who were in at the groundfloor of internet music retailing arising out of a music shop in Jersey. They saw the commercial advantage that low value consignment relief provided to them as Jersey residents and were super successful at exploiting it. As a Jersey resident business they paid tax on their earnings there. They also set up a call centre operation in Cambridge too which has provided a lot of jobs for students. It could just as easily been set up somewhere else offshore with cheap english speaking labour if they were primarily interested in tax avoidance.
This is an entirely different kettle of fish in my book to TESCO setting up in Jersey to do the same thing and cannot be characterised as tax avoidance by Play.com. They simply played the hand they were dealt and did it very well. The big boys didn’t like the competition and as with all tax loop holes it wasn’t closed until everyone started doing it and the cost of allowing it became too high. In fact for the directors of Play.com LVCR for them was much more akin to an ISA for us in the UK. A deliberate relief agreed between UK and Jersey to allow small business in Jersey a level playing field into the UK. No different to beneficial tariff terms agreed or imposed between different countries that UK traders can exploit.
For me this illustrates just how complex the question of what constitutes tax haven tax avoidance actually is. Jersey is a recalcitrant tax haven but it also has indigenous traders there who have the same desire to trade across borders as UK traders do. Its dangerous to tar everyone with the same brush just because they are associated with Jersey. Its no different to saying all UK benefits claimants are spongers. Some are, some aren’t.
I cannot see how Play.com harmed the music industry by shifting their products. It is internet retailing per se that causes damage to UK shops and job losses but you can’t turn back the clock or blame Play.com for that. Internet trading also makes tax abuse easier but as in all these things its down to parliament and government to come up with fair and sensible laws to ensure UK gets its fair share of tax. By that I mean both UK tax laws and proper oversight and control of tax havens on British overseas territories.
Whoever owned Play they abused UUK tax law
That’s the beginning and end of it
They had no need to split packages to avoid tax, but they did
Game over for your argument
There is nothing wrong with running a business from Jersey but the only reason you’d have a fulfilment centre in Jersey and physically move your products there to supply 90% of your customer base (UK) and split orders is to abuse VAT as Richard said. Play had a UK base in order to gain from UK major label support. They won’t give you advertising spend unless you have a UK presence. Play also consistently denied LVCR was important to them and only sold goods below £15/£18 from CI. Everything else was shipped from a UK warehouse. Play.com damaged UK/EU INTERNET RETAIL . We all know that shops v internet is another issue but shops also want to sell online . It amazes me how consistently deaf supporters of LVCR scams are regarding the arguments here. I’ll say it again IT DAMAGES COMPETITION ON THE INTERNET IN THE UK/EU . Internet retail is nothing more than Mail Order which has been around for over 100 years. Don’t confuse mail order with VAT SCAM.
Richard Allen of RAVAS interviewed on BBC Radio Jersey was very adept in outmaneuvering the Morning Show presenter who tried to make him to express guilt for the suffering of those about to loose their jobs. (Richard knows well how partial BBC Radio Jersey can be in defending tax abuse). Allen reminded listeners about the job losses in the UK as LVCR was growing, over which no tears were shed in Jersey. A tax-break was not a proper foundation for a business. Employers and governments in Jersey and the UK are responsible for pushing the industry. Workers loosing their jobs now know who to blame.
http://www.bbc.co.uk/programmes/p012lv78 37 minutes in
Richard is very, very good
Richard I disagree on this occasion. Play was a Jersey start up that did business in the regulatory environment it found itself in which was designed pre internet. This did not become a scam till TESCO moved in. I am fimly opposed to all tax scams.
Richard Allen’s comments as reported by Jenny are broadly right but he says that a tax break is not a solid foundation for a business. Thats not strictly true. the VAT registration limit is a tax break that provides many businesses with an easy competitive environment in which to grow. What I guess Richard meant was that a tax break is not a solid foundation for a big business, though its certainly a useful springboard for a start up one.
Play put goods in two packages to get a tax break that was never intended
That was a scam from the first day it did it, which was a long time before Tescos moved in
Phil you assume LVCR is a legitimate tax break for the purpose of selling goods VAT free in the EU. That is not supported by legislation or the general principles of the Principle VAT Directive. LVCR might be a legitimate import VAT exemption but it was intended to relieve “the imposition of tax on the importation and the remission of tax on exportation in trade between Member States” so that VAT operated in a way that ensured that it was “non-discriminatory as regards the origin of goods and services, so that a common market permitting fair competition and resembling a real internal market may ultimately be achieved” (Sixth VAT Directive Recitals on Import VAT Exemptions). It was essentially a pre- single market free circulation for low value goods. What Play.com and everyone else did was an abuse of the intention of LVCR which was never intended for use by third countries as its purpose was to relieve VAT on transactions between member states. Member States are obligated to prevent abuse. Every order ever sent by Play.com was sent as individual packages which was clearly an abusive arrangement. Furthermore items over £18 were sent from the UK. Sorry but that is not as you imply a “tax break” I met with senior officials at the Commission in November 2010 and they agreed and the only reason this took so long to deal with was the UK had to do it whilst dealing with the complexities of relations with the Channel Islands. I was asked by a senior official at the EU incredulous at the VAT being lost “What’s so special about these Islands ?” My response was “Its a long story……”