VAT relief to end for Channel Islands

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

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

VAT relief to end for Channel Islands

ch-is.jpg

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 & shared bottom lb ros

More from across our site

The event comes at an important moment for professionals dealing with practical realities related to this practice area
Germany’s dogmatic restriction of third-party investment in tax advisory firms will only serve to slow down innovation and access to justice
The Irish government has been told that it’s spending too much of its corporation tax receipts and should instead focus on running bigger surpluses; plus, the IRS is set to merge tax practitioner offices
A company risks double taxation, penalties and inquiry cost if it submits a form with anomalies under the new system, Asker Ali also tells ITR
Arindam Mitra and Robin Hart examine how aggregate TP rules clash with transaction-level customs rules, creating compliance risks and requiring granular, SKU-level pricing strategies
The scandal has come just three years after the PwC tax leaks controversy and has prompted KPMG’s Australian chief executive to resign
In the first of a two-part series on capital v revenue in R&D, Jayne Stokes explores these key concepts and where UK companies need to tread carefully
Magnus Pantzar is set to join as managing director after spending nearly a decade as EQT’s global head of tax
The OECD’s project was up for debate as Matt Williams spoke to ITR following BDO’s tax strategist survey, which uncovered increased complexity and costs among multinationals
The recent spree of firm mergers and acquisitions proves that geographic scale is the name of the game
Gift this article