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Channel Islands Will Not Appeal UK VAT Ruling

by Jason Gorringe,, London

06 April 2012

The Jersey government has decided not appeal the decision of the High Court in London, which ruled that the United Kingdom government's decision to revoke Low-Value Consignment Relief (LVCR), a value-added tax concession, for the Channel Islands was consistent with European Union law.

Following a three-day judicial review at the High Court in London, which began on March 13, 2012, it was found that the United Kingdom was entitled to remove the relief, which provides that low value goods may be imported to the UK from non-European Union territories and sold free from value-added tax if they are priced at less than GBP15, down from GBP18 before November 2011.

The scheme had encouraged many businesses to set up warehouses in the Channel Islands from which they exported items such as CDs and DVDs to the UK. However, the relief was controversial, and some argued that it contributed to the demise of some traditional 'high street' retailers. The judicial review found that, under European law, the United Kingdom had no obligation to treat one territory “the same as another” and therefore was permitted to remove the relief solely for the Channel Islands while the concession remains for other non-EU territories.

Following the decision, the Jersey government said it would consider an appeal. However, Jersey's Economic Development Minister, Alan Maclean has now confirmed that, having sought specialist advice and following consultations with Guernsey, the island will not pursue an appeal.

Maclean said:

"On March 15, 2012, Justice Mitting ruled that HMRC’s action to withdraw Low Value Consignment Relief from the Channel Islands alone was lawful. We were given leave to appeal and specialist legal opinion was commissioned on the prospects of such an appeal. The Ministerial sub-group leading on LVCR, chaired by the Chief Minister, has now considered that advice in detail.”

“We have been advised that the Court of Appeal would be highly likely to refer the case to the European Court of Justice. The expected timeframe for a decision would be between 18 months and two years, which is too long to have any material effect on local businesses and their ability to continue operations in Jersey. Therefore, the decision to appeal would be made solely on a point of principle, rather than its impact on employment in the island.”

“In considering the wider implications and the inevitable uncertainty of the final outcome, it has been decided not to proceed with making an appeal. It was important that this matter was considered by the High Court given the law is, as the Judge commented, unclear in this area.”

“However, the primary reason for taking the matter to Judicial Review was to save jobs. We must now concentrate all our efforts and resources on this, rather than pursuing the legal argument any further. We have worked closely with our counterparts in Guernsey throughout this process, and the Guernsey Policy Council has similarly concluded that an appeal should not be lodged.”

“This is a difficult time for many in the island. I will be meeting members of the fulfilment industry to discuss the outcome, explore ways we can support them and answer any questions they may have.”

TAGS: court | tax | business | value added tax (VAT) | tax avoidance | commerce | law | offshore e-commerce | international financial centres (IFC) | Guernsey | Jersey | United Kingdom | offshore | internet | e-commerce | legislation | tax breaks | retail

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