All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

VAT relief to end for Channel Islands


The UK has decided to end VAT relief on products from the Channel Islands.

Low value consignment relief was established in the 1980s, aimed at reducing the costs associated with collecting very small revenues from the tax.

“Originally it was an administrative relief,” said Andrew Burman, senior director at Alvarez & Marsal Taxand UK. “There is a cost associated with collecting lots of small amounts of VAT and cost-benefit analysis showed that it was not worth collecting those small amounts.”

The relief permitted companies to export goods below the threshold of £18 ($28) to the UK mainland without incurring a VAT liability. But in March this year the government reached a decision to lower the value threshold from £18 to £15, effective from November 1 2011.

It has since been revealed that the relief will be scrapped altogether on April 1 2012. Some companies took advantage of the relief but a number of abuses have prompted its removal.

“There is perhaps an argument that it should never have been introduced in the first place,” said Burman. “It was meant to cut administrative burdens, but it presented obvious opportunities for planning schemes due to the Channel Islands being so close to the UK mainland, among other reasons.”

Companies were able to undercut their competitors by not paying VAT and this gave rise to an unfair advantage.

Some of the islands’ inhabitants claim that the exemption offset the additional transport costs felt by companies based there, arguing that it should not be abolished. There has also been discussion of whether the Channel Islands have grounds to challenge the abolition on the basis of discrimination.

“I’d be very surprised if the UK would have done this without consulting EU lawyers or officials,” said Burman. “One argument the UK government could use if the decision is contested on the grounds of discrimination is that abuse has been higher in the Channel Islands than anywhere else.”

More from across our site

The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
This week the Biden administration has run into opposition over a proposal for a federal gas tax holiday, while the European Parliament has approved a plan for an EU carbon border mechanism.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree