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Channel Islands To Challenge UK Tax Decision

by Amanda Banks,, London

22 December 2011

The governments of Jersey and Guernsey have announced they intend to launch legal challenges to the United Kingdom's decision to exclude the Channel Islands from value-added tax exemptions on low-value goods, under Low Value Consignment Relief (LVCR).

The UK Treasury had announced that from April 1, 2012, the relief will no longer be offered to goods exported to the UK market from the Channel Islands.

The LVCR scheme allows goods imported to the UK from non-EU territories to be sold free from value-added tax (VAT) if they are priced at less than GBP15 since November 1, down from GBP18 previously. 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.

However, under legislation announced by the UK Treasury on November 9, LVCR will continue to apply with the new GBP15 threshold to commercial supplies from all non-EU jurisdictions except the Channel Islands. Jersey and Guernsey have decided to challenge this decision on the grounds that the United Kingdom has infringed European law, although the UK government had taken advice on the matter from the European Commission.

On behalf of the Jersey government, the island's Minister for Economic Development, Alan Maclean, stated:

"Following discussions between Ministers and with colleagues in Guernsey, and after very careful consideration of legal advice, we have decided to commence legal proceedings through the English courts to seek to clarify EU VAT Law in relation to proposed changes to Low Value Consignment Relief published as part of the draft UK Finance Bill 2012."

"Taking legal action in this matter is a decision that has been carefully weighed. Having received advice from legal specialists in this area informing us that we have a strong case, I am satisfied that we are right to take these initial steps in seeking further clarification of EU Directive 2009/132/EC. Together with the States of Guernsey, we have a duty to protect the interests of the islands and to that end we will be seeking clarity in the courts in order to help us make well-informed long-term decisions for the future benefit of islanders."

TAGS: tax | business | value added tax (VAT) | law | Guernsey | Jersey | United Kingdom | offshore | legislation | retail | European Union (EU) | Europe

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