The UK Treasury denied that it pressured the States of Jersey to stop retail giants such as Amazon and Tesco from setting up on the island.

The Forum of Private Businesses (FPB) is currently waging a campaign against big companies opening in Value Added Tax (VAT) free jurisdictions, which, it says, exploits a loophole to avoid paying tax to the UK Treasury.

A spokesman for the FPB, Mr. Ben Pinnington, said ‘The forum is turning up the heat in its war against retail giants exploiting the Channel Islands’ VAT status by taking its campaign to a key meeting with HM Revenue and Customs today. The meeting comes days after we received a tip-off from a source close to Jersey’s government that confirmed HM Treasury exerted enormous pressure on the Jersey government earlier this summer. This resulted in the Jersey government’s embarrassing U-turn in announcing that no further UK-based retail giants would be allowed to set up on the island. This came just months after Jersey’s leaders had made the industry a key part of its future economic development.’

A UK Treasury spokesman confirmed that the FPB was meeting with HM Revenue and Customs and that it was always eager to listen to representations from small businesses. ‘This is a routine meeting with no fixed agenda,’ said the spokesman.

Jersey recently announced it planned to restrict the growth of companies using the island’s favorable Value Added Tax status to export goods to the UK without contributing to the economy. The new policy aims to get the greatest economic benefit for island-based Internet and mail-order businesses but, at the same time, will limit growth in activities of UK-based companies that direct the flow of sales of CDs and DVDs through the island.

A Treasury spokesman added that no one from his department has spoken to Jersey about changing its policy. ‘The Treasury did not discuss this with Jersey in advance of its announcement. The government notes with interest Jersey’s announcement and is keeping this issue under close review,’ he said.

The Forum of Private Businesses is asking the Treasury to put a stop to what it says is a loophole, known as the de minimus facility, which allows retailers to sell products such as CDs and DVDs worth less than £18 through VAT-free jurisdictions, thereby avoiding having to pay duties to the Treasury. The FPB believes the practice undermines traditional retailers.

‘We will be telling HM Customs that high street shops are being fatally undermined by this anti-competitive and deeply cynical tax dodge, as they cannot compete on price,’ said FPB chief executive Nick Goulding. ‘The loophole needs to be closed so independent shops can compete on a level playing field.’

De minimus was introduced by the European Union as a way of relieving administrative burdens. The UK Treasury said it knew of some businesses who using it as a means of selling goods to UK consumers VAT-free and was keeping a close watch on the situation.

‘The EU law provides for a common system of VAT on small consignments, which gives member states only limited flexibility. The concept of a VAT-free threshold was intended to relieve the administrative burden on businesses, mail order operators and Customs authorities. The law provides member states with some flexibility, but otherwise a change in EU law would be necessary.’

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