VAT-Free Goods From Jersey
The States of Jersey Economic Development Committee announced measures for controlling the growth in VAT-free sales of goods through the Island by UK-based companies that use EU concessions on Low Value Consignment Relief (LVCR) – commonly known as the under-£18 relief in the UK. The policy is aimed at encouraging genuine Jersey-based businesses with sound business models to operate from Jersey as it is believed that these businesses will create high value economic growth for the Island. However, Jersey structures that lack substance and are simply conduits for UK businesses to merely facilitate the fulfillment of VAT-free goods from Jersey; will find that opportunities for growth will be limited.
Additionally, this issue has been flagged up in the UK Parliament due to the increasing loss of VAT revenues, particularly following the migration to Jersey of parts of the fulfillment operations of certain high profile retailers. HM Revenue and Customs of the UK are scrutinizing such structures much more from the point of view of whether these re-located businesses are genuinely managed from Jersey and particularly the VAT aspects of the day-to-day operational processes involved.
We and our expert advisers have always maintained that LVCR operations should be set-up with proper substance in Jersey and have advised clients accordingly as to the comprehensive procedures to be followed. We are therefore pleased that official confirmation has now been given in this regard.
In order to assist prospective clients and their advisers regarding VAT-free sales from Jersey, the following issues should be seriously considered. This list is not intended to be comprehensive, but is merely a basis for taking further advice.
-
The Jersey operations should be structured such that the business is managed and controlled from Jersey by Jersey-resident directors.
-
The hosting of the retail website and customer order confirmation process should originate on computer servers located in Jersey.
-
Detailed advice should be sought on critical VAT issues such as place of supply and how to avoid the risk of the place of supply defaulting to the UK through ignorance of VAT issues or incorrect goods handling procedures; time of supply, tax point, "collection" of goods from Jersey rather than "delivery" by the retailer; " EU free circulation" of goods issues; suppliers and customer orders and returns, customer terms and conditions and supplier contracts, affiliate websites, pricing policies, outsourcing of certain functions back to the UK, fulfillment from Jersey to EU countries other than the UK and many other VAT issues.
RKG Consulting, providing expert support to the Basel Trust Group, has advised a number of small, medium-sized and large companies regarding VAT-free sales from Jersey. Almost all of our clients have commissioned detailed VAT Reports to study their particular circumstances and to advise how the VAT-risk can be mitigated by properly setting up in Jersey.
If you would like to find out more about our services and how we can help your business please contact us by completing our online enquiries form.
Alternatively please feel free to call Grant Twine or Mark James on +44 (0)1534 500 900.
December 2008