This week the UK High Court heard a judicial review of the case, which related to the islands benefitting from this VAT exemption, and ruled that the proposed changes to LVCR are compliant with EU VAT law
The UK chancellor is expected to formally announce the end of LVCR in next week’s budget.
This will mean that from April 1, it is anticipated that VAT of will be applied to all commercial consignments from the Channel Islands, regardless of value.
Mr Justice Mitting told Jersey and Guernsey they could appeal the decision to a higher court.
“I am extremely disappointed at this outcome and we will now be considering whether to lodge an appeal,” said Alan Maclean, Jersey’s Economic Development Minister. “The changes, which are targeted against the Channel Islands alone, create an uneven playing field. We know that some businesses will find it difficult to compete under these circumstances and as such, jobs are likely to be lost
LVCR was established under EU law in the 1980s to exempt low value goods purchased and imported outside the EU from VAT, to cut the administrative costs associated with collecting small amounts of the tax.
However, companies such as Amazon and HMV set up offshore mail-order operations in Jersey and Guernsey – which are not part of the EU – to exploit the VAT relief loophole.
Click here to find out how Channel Island companies will continue to take advantage of the exemption.
FURTHER READING:
Why HMV and Channel Islands’ resistance to scrapping tax relief is futile
