Before reading this post I encourage you to read this retraction. Particularly if you are a resident of the Channel Islands.
The Channel Islands enjoy exemption from UK VAT (sales tax). I’d always wondered why this would be, and unable to find any reason for it I asked a few people. The overwhelming answer that came back was that the Channel Islands were granted exemption from VAT after World War II as a means of recompense as the British Armed Forces failed to prevent occupation of the islands by the Germans. Sounds fair enough really – the occupants of the islands had been UK tax payers and as such had every right to expect the protection of the British Armed Forces against invasion.
Now, World War II ended in 1945. Any islanders that survived the war as adults will obviously now be close to 80 years of age, or more likely dead. The vast majority of the population would have been born post 1945 and not have experienced the occupation by Germany.
Of course, it goes deeper. Companies are exploiting the VAT exempt status by setting up logistics on the islands, and shipping goods into the UK without having to charge VAT (the products they sell have to be lower than £18 in value of they will fail to avoid the tax). There is a long list of companies including Play.com, TheHut.com, HMV, Tesco and (of course) Amazon.
I was reading on Amazon the other day about their “preferred” merchant, IndigoStarFish.com. The official line from Amazon refers to IndigoStarFish as a separate entity. Presumably there is a reason for this, and there is some information online suggesting that the mass distribution of CDs & DVDs from tax exempt locations into the UK is supposed to be regulated, but clearly nothing is happening. Amazon might refer to IndigoStarFish as their “preferred merchant” but since Amazon OWNS 51% of IndigoStarFish, that’s just a bit rich.
Please don’t be naive enough to believe this is all for your benefit as a UK consumer getting cheaper CD’s & DVD’s. Merchants operating out of the Channel Islands typically undercut their UK Mainland based competition by 10%. Bare in mind they are saving 17.5% by not having to charge VAT. So whilst avoiding tax, they are also making an extra 7.5% on the bottom line. Remember, small items can go through the Royal Mail, and the Royal Mail serves the Channel Islands. A first class stamp costs the same in the Channel Islands as it does in Birmingham or London so the merchants operating from there have no additional logistical costs, despite what must be a huge cost to the Royal Mail – that’s something you and me here in the UK are subsidising every time we buy a stamp. Additionally, it’s estimated that by moving goods from the UK out to the Channel Islands then back agian means a CD or DVD you buy online has travelled an extra 1000 miles just to make this whole tax dodge work. So here are the “costs” & savings broken down:
- You’ve saved 10% on your new DVD movie.
- The merchant has increased his bottom line profit by 7.5%
- The merchant gets extra business simply because his mainland competitors are unable to compete (remember Woolworths? this is a major factor in their demise)
- If you think CO2 is damaging the environment, ask if it’s worth your CD travelling another 1000 miles so you can save a quid.
- Royal Mail (by charter) incurrs huge extra costs WHICH YOU PAY FOR by having large volumes of post from an offshore location
Now, IndigoStarFish. I had a look into this
. The guy at the head of this company (Alan Cox) is there to the right raising his glass to you. He looks happy doesn’t he? Well he would, he doesn’t pay VAT when he buys the wine he’s drinking. I could be wrong, but he doesn’t look 80 to me, so he’s enjoying a glass of VAT free wine while not having to have gone through the rather tedious inconvinience of having suffered under Nazi occupation of his home.
I’m guessing, but could the name of his company be some kind of corporate joke? Clearly he’s set up a distribution company in cahoots with Amazon. They have in the past had some quite high profile legal battles with a Canadian bookseller called Indigo. To me, it sounds like the name of this company is basically a one finger salute to that Canadian company. Just because I’m pedantic, I’d also point out that “StarFish” is a meaningless term – there’s no such thing. The correct term is “Sea Star” as any educated person knows. If you’re not educated that’s no problem – you can learn this by watching SpongeBob Squarepants.
I couldn’t help but read what was on his website – here’s a couple of snippets which I’ve thoughtfully covered with a translation into English:
“We will take all reasonable steps to manage our operations so as to minimise our environmental impact and to promote good environmental practice.”
hmmm – by making a CD travel an extra 1000 miles?
“We look actively for opportunities to improve the environment and to contribute to the wellbeing of the communities in which we trade.”
Er, you ( and a bunch of other companies) are directly responsible for the destruction of (for example) Woolworths at a cost of close to 30,000 jobs here in mainland UK – have you got any idea of the economic impact of that number?
I was going to drop a link to his website, but I noticed there’s not one backlink on Amazon.co.uk to their “preferred merchant”. Presumably is Amazon don’t want to link to it, there’s a reason right? After all, Amazon are a company to trust right?
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I just wrote a long comment but this website lost it when it came up with the error “Please enter an email address”. What a shame.
(hmmm – by making a CD travel an extra 1000 miles.) Hardly a 1000 mile from the UK.
(Er, you ( and a bunch of other companies) are directly responsible for the destruction of (for example) Woolworths at a cost of close to 30,000 jobs here in mainland UK – have you got any idea of the economic impact of that number?)
You don’t seriously think Woolworths closed down because of no vat on CD’s from Jersey. They were crap shops that had not moved on since the 60′s. The management were rubbish as were the staff.
Dave, sorry to hear that – would love to see the comment.
Steve, OK, perhaps blaming the demise of Woolworths entirely on cheap CD’s, DVD’s & games shipped from the Channel Islands without VAT is a bit strong. Yup, they were badly run, but also up until the mid nineties they were the largest music retailer in the UK. Maybe if they’d set up a half decent website and done the same thing they’d have fared better.
I still don’t think it’s right though – a handful making a fortune evading VAT while the masses over here (me being one of them) are staring down the barrel at huge tax increases in the coming months & years.
What utter rubbish. We are a self ruled Island. The UK Does not support the Islands ie health etc, in any way.
We have our own laws and our own form of VAT, here it is called GST.
Do yourself a favour, and do a bit more research on the history of the Channel Islands, before you write a blog such as this.
Here is a little help for your research:-
http://en.wikipedia.org/wiki/Channel_Islands
Russel, I appreciate the comment. I don’t appreciate you citing Wikipedia as a source though – please point me to an official Channel Islands site.
Having not bothered to read the Wikipedia page, I’d like to ask, if the Channel Islands has no connection to the UK:
1. How come the Royal Mail services the Channel Islands. You get to send an item anywhere in the UK using a first class stamp that costs the same as it does on the mainland, despite the obvious expense of a helicopter to get it accross the water. That sounds like a subsidy from the UK to the Channel Islands to me.
2. The Channel Islands isn’t in the EU – pretty sure that’s correct. That being the case, why are UK residents not charged import duty on goods “imported” from the Channel Islands like they would from any other non-EU location. That also sounds like a subsidy – I could Google the figure, but I don’t really need to. It’s going to be millions.
1/ The Royal Mail does not operate in Jersey, That is covered by Jersey Post. Mail destined for Jersey is held at sorting centres in the UK.
Twice daily flts operate from here to the UK to deliver and collect the mail, larger items are sent by sea.
The cost is divided by both postal services, ie a commerical agreement – just the same as they do for all other countries, either in the EU or not.
2/ Now here you really should read up on your own HM Revenue & Customs information provided by them.
http://customs.hmrc.gov.uk/cha.....nt#P13_726
Now you will see that you do indeed have to pay import duties, once a certain value limit has been reached (set by UK HM Customs). My Daughter, who lives and works in the UK got married this year, and I bought the wedding rings and sent them to her, guess what? she had to pay VAT.
Now I have a question for you to answer, Why do English companies who operate in the Channel Islands continue to charge prices that include VAT, when it does not apply here? Who is getting that extra revenue? Not HM customs. Check out Iceland, Marks & Spencer, Next, Topshop, BHS etc. Now those companies far exceed the amount that you feel Amazon “robs” the UK taxpayer.
Now for further reading for you:-
Jersey website,
http://www.jerseylaw.je/law/di.....c223147241
UK Gov website,
http://webarchive.nationalarch.....encies.htm
The Link to Wikipedia, and in fact Google would lead you to all the information that you require to learn the truth about the Channel Islands. We are Crown Dependencies.
Can you also post links for your article re the question of VAT and the supposed exemption from VAT after World War II due to German Occupation
Andy
Guernsey Post and Jersey Post operate postal services in their respective Bailiwicks. The cost to post a letter within Guernsey is 36p and to post to the UK is 45p. I believe you pay 41p for a stamp in UK and 36p for franked mail?
Royal Mail deliver post to the aircraft in the UK, the Channel Islands postal services fund the flights – in effect if you send us a letter from the UK we subsidise you.
The islands are not part of the EU neither are they part of the UK. They have never ever been part of the UK owing their allegiance to the Crown as Duke of Normandy. Liz in our Duke not our Queen.
Therefore the islands have never been part of the UK tax system and VAT was only introduced in the UK in 1973 not 1945.
The £18 deminimis limit covers all post parcels from outside of the UK for commercial goods and £40 for gifts. It is set because below this threshold it is uneconomic to collect VAT of a couple of quid.
As a Guernsey resident but also a UK tax payer on account of some work I undertake in the UK your government is happy to take several thousand a year from me but should I fall ill I’m not entitled to the NHS – This was also true of pensioners who have retired to the islands, pensions taxed in the UK but no services offered.
It cuts both ways.
Fact checking is always a good plan.
I live in guernsey channel islands, no we should not pay VAT, we instead pay shipping charges and our taxes are alot higher than the UK mainland and cost of living is also alot higher
Woolworths did NOT send DVDs or CDs from the channel islands they were sent from EUK which had nothing to do with the channel islands
From an outsiders point of view I can see where the unfairness lye’s. As Non-UK Island then if they have a no vat law for what I can see are good reasons we have to deal with it, happy days for them. Where UK residence would get annoyed is when companies of what ever nature go there and are given the same liberties and the islanders. Why is there not a law to say ONLY CHANNEL ISLAND RESIDENTS AND COMPANIES ARE ALLOWED VAT FREE LIVES.
I see what you mean Andy and agree that these people shouldn’t have these liberties but also the islanders themselves shouldn’t get caught up in these turds being slated.
Just want to say i am owner of a uk retail/web business, i have no axe to grind with the channel islands people as this issue is not of there making.
But the uk goverment needs to close this massive loophole that big business is getting away with and costing us all a small fortune, but i also dont think genuine channel island companies should be punished, my idea would be to allow up to £100,000 of tax free imports per year maximum, after this full uk vat has to be paid, that way the big boys, ie amazon, tesco, play etc, start paying what they should, also did anyone notice that play & amazon ship from the uk, i am sure only a piece of paper goes to the islands for “export”, who else has tried and got a uk stamp? As the previous poster said it should be Jersey Post!
The uk goverment say they are losing millions of pounds per year in lost revenue, well this is time to do something about it!
While it’s been explained by practically everybody else, I’ll summarise – here in the Channel Islands we don’t pay VAT because we’re not part of the UK. There’s no point looking for a “reason” or associating it with the war, or any of that absolute nonsense – we weren’t “UK Taxpayers” before the war, and we aren’t now.
Asking “why” we don’t is as absurd as asking why France or Germany don’t pay VAT – it’s because it’s a UK tax, and we’re not in the UK. Simple as that.
The fault lies with companies exploiting tax loopholes – not just in the Channel Islands, but anywhere in the world – not with those of us lucky enough to live here. Saying that everyone living here should arbitrarily be made to pay a UK tax on top of our own just because you’re not happy with how Amazon goes about their business is absurd.
I’m not familiar with the rest of your blog, but if it’s as ill-researched and outright untrue as this entry, I shouldn’t think I’ll bother.
It is rare that I have the displeasure to read a blog which contains so many inaccuracies and blatant untruths. It is misleading information such as this which causes so many problems in this world. I am not sure if Andy Fletcher’s intention was to mislead or he simply did not bother to do any even basic checks on his so-called facts but let me correct them here.
1) The Channel Islands are not part of the UK or European Union. They consist of two independent self-governing Bailiwicks of Jersey and Guernsey. They have never formed part of the kingdom of England or part of the formation of the United Kingdom of England Scotland and Wales. The Jersey government for example has been documented to date back to before 1497. Internationally Jersey and Guernsey are recognized as effectively independent countries; however they are referred to as Crown Dependencies.
2) Both Jersey and Guernsey have their own governments, laws, currency, taxation and health care systems etc. which are totally independent of the UK. In the case of Jersey they have their own form of VAT called GST. The islands receive no income from the UK whether derived from VAT, income tax or any other form of UK taxation. For Andy Fletcher to say something like “Channel Islands enjoy exemption from UK VAT” is like saying its wrong for Australia or any country in the world to be exempt from UK VAT.
3) Even as recently as 2007 the UK Lord Chancellor reconfirmed in an agreement Jerseys independent international identity which states i) UK has no democratic accountability in in or for Jersey. ii) Jersey’s international identity is separate from the UK.
4) Jersey and Guernsey’s tax status has absolutely nothing to do with the occupation of the islands during WW2. The independent status was granted to the Channel Islands in the 16th century by King Charles II allowing the islands to levy their own duties. Since then taxation has always be separate from the UK. The islands receive no income from the UK derived from VAT, income tax or any other form of taxation. God knows where Andy Fletcher got the idea it had anything to go with the Germans. Utter Rubbish.
As for Andy’s opinion that the islands are exploiting the UKs VAT limit on imports that’s fine, I believe the UK is still a free and independent democracy (like Jersey and Guernsey are). But remember this VAT limit applies to all imports from any country into the UK. The Channel Islands have the right like any country in the world to perform international trade on an equal footing.
Repost of above – I’m not familiar with the rest of your blog, but if it’s as ill-researched and outright untrue as this entry, I shouldn’t think I’ll bother.
If anyone from the Channel Islands actually bothered to read the post, you’d quickly realise that he’s not suggesting that residents of the Channel Islands should pay VAT, but rather that companies based in the Channel Islands should pay VAT on all goods exported into the United Kingdom. In other words, there shouldn’t be any “Low Value Consignment Relief”.
Low Value Consignment Relief has several effects on the UK economy, not least the UK retail industry and lost revenue for Her Majesty’s Treasury through lost VAT.
Perhaps the biggest loss though is that of consumer rights. You are all right when you say EU and UK law do not apply in the Channel Islands – which is exactly why British consumers shouldn’t order goods from there – it means that they don’t enjoy the extensive consumer rights available to them in all EU Member States and have no right of redress should their purchase not pan out the way they would like it to.
Low Value Consignment Relief is, of course, a matter for the British Treasury to resolve, but as a British citizen I see no reason why any of the Crown Dependencies should be awarded LVCR of any kind.
Jonathan
You miss the point entirely. His blog post is factually wrong on almost every level. He makes out as if Channel Islands residents are receiving some kind of favour by not having to pay VAT. Its like saying we’re doing the French of Germans a favour by not making them pay UK VAT.
The Channel Islands are not part of the UK nor EU and that is why UK VAT is not paid here.
As for Channel Islands companies paying VAT on exports to the UK, i think you will find it is the receivers responsibility to pay VAT on any import into the UK not the sender. You wouldn’t expect a German business to pay VAT for a customer ordering from the United Kingdom.
Im constantly amazed that people continue to post factually incorrect, ill researched rubbish.
He hasn’t even made an attempt to retract or correct his blatantly poor research.
coorr, tensions are getting high!
i say, who cares! im from london so i excpect everything to be mega expensive anyway!
good on ya channel islanders, you lucky lot
[...] post is a retraction and clarification of some of the points made in my earlier post. After reading the multitude of comments (most it would seem made by Channel Islands residents) I [...]
Why is everyone so bothered about Woolworths?
Ok so jobs were lost but the UK is a big place and there are plenty more jobs…
Once VAT hits the islands we’re Stuffed. Totally Stuffed, Loads of companies will close and ALOT more jobs will be lost.
I live on one of the smallest islands, and a fair few companies here will close and they make up about 40-50% of the jobs on the island!!
So I think that you mainlanders should stop talking about stuff you don’t understand and leave us Islanders alone.
Hi James, if any offense has been caused then I am sorry. Jonathan is, however, correct in stating my issue is not with the Channel Islands per se, but with HMRC. Allowing VAT free imports for small items was/is intended to make it easy for individuals to send items. It’s not intended for huge companies to evade millions of pounds in duty and by doing so gain an overwhelming advantage over domestic businesses.
A retraction of the incorrect statements has been posted.
50% of the Island’s employment relies upon the tax laws of the UK? That’s certainlyt something I would also be worried about. As things stand, the UK people seem to be keen to leave the EU. Scotland wants to leave the UK. Personally, I’d like a referendum for England to get independance but I’m not holding my breath on that one.