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Healthspan To Challenge UK LVCR Decision

by Jason Gorringe, Tax-News.com, London

15 November 2011


Healthspan, one of the largest product distribution companies in Guernsey, has announced that the company will launch a legal challenge to the UK government's decision to unilaterally remove the Channel Islands' eligibility for Low Value Consignment Relief (LVCR).

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 (GBP18 prior to November 1). The scheme 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 contributed to the demise of some traditional 'high street' retailers.

While Derek Coates, CEO of Healthspan, a leading home-shopping health supplement supplier, said the UK's decision was not "wholly unexpected" he argued that the UK's singling out of the Channel Islands was grossly unfair, with other non-EU territories such as Cyprus, Switzerland and the United States still eligible for the concession after it is revoked for the Channel Islands on April 1, 2012.

“What is surprising and disturbing for the Channel Islands is the way the UK have treated our islands with such disdain and implemented a decision in such a discriminatory manner singling out the Channel Islands in isolation. It must be understood that they have taken no steps to stop LVCR imports from any other country outside the EU including Switzerland, Cyprus, Hong Kong the USA or China. In that respect we are likely to see many companies moving their distribution functions to those jurisdictions,” Coates said.

While Healthspan plans to retain some of its operations in Guernsey, Coates admitted that “to remain competitive...it is unlikely that [the company] will be able to sustain long-term warehousing or postal operations out of Guernsey”. However, he stressed that plans for their relocation had not yet been made.

The company said that following the receipt of legal advice it plans to challenge the legitimacy of the UK government's action whilst examining relocating its distribution operations.

TAGS: tax | business | value added tax (VAT) | tax avoidance | international financial centres (IFC) | China | Guernsey | United Kingdom | offshore | Cyprus | Hong Kong | Switzerland | United States | retail

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