Memorandum by Earthshine Ltd
We are writing in response to the EU Select
Committee Call for Evidence in connection with the Enquiry into
Missing Trader VAT fraud in the EU. We would first like to express
how delighted we are that this subject is being investigated in
greater depth and hope that it will benefit not only industry,
and the taxpayer but allow Her Majesty's Revenue and Customs (HMRC)
to conduct their enquiries more surgically, effectively and without
having to continue the current policy of widespread penalisation,
disruption and obstruction of established and wholly honest businesses.
Earthshine Ltd was established in order to take
advantage of the inflexibility and inability of the main Mobile
Phone Distributors to keep pace with demands and trends. Mr Anthony
Sharp took control of the company in 2002 and was joined in 2005
by Mr Philip Knatchbull and together they have taken Earthshine
forward to the point where we are becoming a Public Limited Company.
We have been at pains to establish ourselves as a trader with
a reputation for honesty, professionalism and integrity. The corner
stones of our business have always been:
(a) Thorough and detailed Due Diligence procedures.
(b) Transparency with HMRC.
(c) Repeat business with tried and tested
reputable suppliers, customers and contractors.
We would like to take this opportunity to explain
a little more about how we try to conduct our business and our
level of compliance and support for legitimacy. Our Due Diligence
process primarily serves to protect us from unscrupulous traders.
We have been made responsible (by HMRC) for establishing the credibility
of our immediate suppliers and customers which we do with uncommon
thoroughness. Our Due Diligence procedures from the corner stone
of our credibility and follow a successful procedure which has
evolved from a simple in-house check to the format we now use;
we initially make contact with a potential supplier or customer
and receive their company details. We will then task an external
agency to investigate that company establishing their track record,
financial standing and credibility, individual company members
profile and historical business dealings. From there, that company's
premises will be visited by an Earthshine representative and the
external investigator and interviews undertaken and where possible
copies of IDs and passports taken in order to confirm identities.
In addition, a large number of digital photos of both the individuals
present and the premises are taken. We see this use of an external
agency as key to providing an independent assessment with greater
credibility. This is an exhaustive and expensive process but we
feel it vital to protect ourselves but also demonstrate to HMRC
that not only do we have Due Diligence of the highest standards
but also that we are trying to comply with the unreasonable requests
placed upon us by Government agency. It is our belief that we
should not be acting as a police force, however, we are at pains
to provide as much information as possible.
It is our belief that in order to deal with
VAT Fraud, HMRC now follows a policy of disruption and delay using
a process called Extended Verification. The required end state
seems to be that of delaying or withholding VAT Repayments the
end result of which is that the industry is unable to function
due to a lack of what is essentially working capital. This policy
is currently being applied across the entire industry regardless
of the presence or absence of suspicion of wrong doing. In a recent
Panorama Programme a spokesperson for HMRC said that they were
happy to penalise the innocent in order to catch the guilty. This
can be neither right nor legal. On a human level our relationship
with our Customs Officer has always been extremely good. We provide
details of every single transaction prior to completion, with
follow ups of hard and soft copies sent via recorded delivery.
We also make it a priority to comply with HMRC requests by return.
However, historically our phone calls have gone unanswered and
our letters are referred to a so called faceless "Central
Hub". We have never had a personal response from the "Central
Hub" and have been told verbally not to send emails or faxes.
We are not provided with telephone numbers nor contacts with whom
we can communicate within this organisation and all efforts to
do so result in fruitless transfers from pillar to post. When
we write to the "Central Hub" we receive no response.
We have been asked repeatedly to send additional information which
we have done expeditiously and sent by recorded delivery only
for HMRC to claim they have never received the information.
Our view point is this: We are a long standing
export trader of mobile phones that has the highest standards
of Due Diligence to ensure we are trading with legitimate traders
and distributors and have always had our input VAT repaid, often
after detailed and unnecessary investigation. Our detailed correspondence
audit trail with HMRC will confirm this proving we are compliant
with HMRC and the Law in every single aspect of our business dealings.
As we see it, we are currently doing a great deal of the investigation
on behalf of HMRC at our own expense. We understand that time
may be required to conduct investigations but we have had repayments
withheld since July. This is completely unreasonable.
It is our contention that we are being unfairly
and illegally targeted as a result of other people's wrong doing.
We accept that there have historically been wrong doers within
the industry and that there may still be those who require investigation.
Our point is that as a Government Agency with extended legal powers
and thousands of officers available to it HMRC should be able
to sort the good from the bad instead of penalising an entire
industry for being guilty by association. We have started detailed
correspondence with HMRC in order to get VAT repaid and we will
be reluctantly issue proceedings in the event that our reasonably
put comments are continually rebuffed or ignored.
16 January 2007
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