Channel Islands challenge Osborne’s LVCR VAT decision

Accountants may remember that George Osborne has decided to scrap the VAT relief on goods that come into the UK from the Channel Islands.

In response to this move, the governments of Jersey and Guernsey have lodged a legal challenge on the grounds of discrimination.

In his Autumn Statement, the Chancellor said that as from the first of April this year, Low Value Consignment Relief would no longer apply to the Channel Islands. However, non-EU countries, such as Hong Kong and Switzerland, will still qualify for the benefit.

The States of Jersey has said that it will start legal proceedings in the English courts in a bid to clarify VAT Law in the European Union.

Lyndon Trott, the chief minister in Guernsey, said both islands are keen to make sure their companies do not suffer discrimination and that is the basis for the legal challenge.

In November it was revealed that LVCR costs HMRC and the UK government £140 million every year in tax relief and lets larger organisations such as Tesco and Boots to have warehouses in the Channel Islands and sell VAT free products to customers in the UK.

Several businesses in the Channel Islands are backing the challenge. The chairman of one such company said the lowering of the rate to £15 in November has already resulted in customers looking for cheaper goods and business revenues are going to suffer.

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