Jersey Clarifies Position On UK LVCR Review

by Amanda Banks, Tax-News.com, London

19 October 2011

Jersey Treasury Minister Phillip Ozouf has dismissed speculation that the Jersey government is ready to accept the loss of the UK's Low Value Consignment relief scheme, a tax break which has benefited the local economy, in return for the UK's approval of its 'zero-ten' corporate tax regime.

In a summary of comments given in an interview with the BBC and published on Ozouf's blog, the Treasury Minister rejected the notion that "somehow government offered to ‘give up’ the fulfillment industry in Jersey in return for the UK’s agreement over the recent Zero Ten review".

"I want to be clear now, the negotiations regarding Zero Ten were and are entirely separate," he added. "It was the EU Code Group, not just the UK, made up of many different countries and viewpoints involved in the ruling on Zero Ten. We made the decision [to] remove deemed distribution, and the harmful effects were dealt with – that is why we secured agreement confirmation regarding our tax regime."

The LVCR scheme allows goods imported to the UK from non-EU territories to be sold free from value-added tax if they are priced at less than GBP18 (GBP15 from November 1). The scheme has encouraged many businesses to set up warehouses in the Channel Islands from which they ship items such as CDs and DVDs to the UK, and some argue that this has contributed to the demise of some traditional 'high street' retailers.

“Industry has always known that LVCR was something that could change, as it was dependent on another country’s tax policy," Ozouf continued. "Because of this, I made a very difficult decision four years ago to terminate the license for UK retailers who were moving here to set up fulfillment companies, and I took a lots of criticism for it. Now it is very clear that if we hadn’t make that hard decisions, we would have seen the end to the LVCR for local companies a lot sooner than now.”

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