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10.02.2015 01:29 Age: 37 days

Ignorance is never bliss

John Harper


John Harper recalls a lesson he learned a long time ago, courtesy of Customs.

The year was 1969 and I was a trainee chartered accountant with a small firm in Jersey. To put this time in perspective, we still had pounds, shillings and pence; I had never seen a calculator or a fax machine; and the idea of using something called a computer would have been as fanciful as fairies at the bottom of my garden. In addition, as all our clients were small businesses in Jersey, I had never even met a businessman from overseas. Indeed, in 1969, if you had asked me about going offshore, I would have assumed that you were referring to taking a small boat and rowing out to sea.

 

"The moral of the story is clear. Never sign anything that you do not fully understand

 

Imagine, therefore, my excitement when we were visited by a gentleman from Canada. He was importing goods into the UK from North America. He told us that, if his Canadian company sold a container of goods to a Jersey company for, say, USD1,000 and the Jersey company then sold it on to the ultimate customer for, say, USD2,000 (the amount that hitherto would have been received in Canada), then his Canadian tax (which was exceptionally high at that time) would be halved, and there was no tax to pay in Jersey. ‘Quite brilliant,’ I thought. ‘I wish I had thought of this arrangement myself.’

Before he left the office, he invited not only my boss but also me, a mere 21-year-old trainee, to be a director of this new company. I was to be a company director. My head was spinning! The client also asked me to sign a large bundle of UK Customs forms that apparently were needed when the goods entered the country, so as to declare the amount of import duty payable. This I duly did, with pride. ‘We have agents who will fill in the detail, so don’t you worry, young John. Your signature is enough.’ Such were his parting words.

For the next three years, I handled hundreds of shipments. The company had accumulated over GBP3 million in the bank, which, when I was earning about GBP700 a year, seemed a very great deal of money.

I thought my burgeoning career was about to come to a sticky end when a man from HM Customs and Excise came to the office one day and asked to see me. He reeled off that well-known police caution ending in the words ‘anything you do say will be taken down and may be used in evidence’. It transpired that, according to Customs, duty should have been paid not on the USD1,000 that the Jersey company paid for the goods but on the USD2,000 that the end customer paid. The forms C105 (I can still remember their name today, some 46 years later) declared the lower of the two values and, of course, they all bore my signature. The Customs man quite understandably assumed that it was me who had falsely declared the undervalue.

To cut a much longer story short, our client assured us that the Customs man was wrong, so we took counsel’s opinion. I so well recall sitting in front of the learned QC when he duly announced Customs was correct and I could expect four years in prison. I wished the ground could have opened up there and then. My subsequent course of action was entirely concerned with self-preservation: I spent the next three days and nights in the office recalculating all the duty payable on every shipment (still with no calculator). I then flew to London and plonked the large bundle of paperwork on my new friend’s desk, together with a cheque for well over GBP2 million. ‘Good heavens, Mr Harper,’ he said. ‘I didn’t expect to see you again – at least not on this side of the bars. I have just allocated three accountants one month to do what you appear to have done on your own. Provided this cheque does not bounce, I think we can call an end to this matter. Good day.’

The moral of the story is clear. As trustee, administrator and, certainly, director, you should never sign a document in blank and let someone else fill in the detail. Furthermore, never sign anything that you do not fully understand. It is far better to be called pedantic, or even stupid, than to lose your liberty.

 

 

Resource:

www.step.org/ignorance-never-bliss