International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

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 across site & bottom lb ros

More from across our site

ITR’s latest quarterly PDF is going live today, leading on the EU’s BEFIT initiative and wider tax reforms in the bloc.
COVID-19 and an overworked HMRC may have created the ‘perfect storm’ for reduced prosecutions, according to tax professionals.
Participants in the consultation on the UN secretary-general’s report into international tax cooperation are divided – some believe UN-led structures are the way forward, while others want to improve existing ones. Ralph Cunningham reports.
The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.
Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.