The VAT scheme for C.I. shut down by Treasury
Unfair tax advantages for GY and JY are history
The Channel Islands have finally lost their legal challenge to stop the UK government terminating a VAT loophole that has enabled retailers to ship tax-free goods including DVDs, greetings cards and vitamin pills from the territories. The exemption, known as low-value consignment relief, has enabled companies based in the islands to escape VAT on goods sold to the UK. It will now be scrapped in the Budget next week.
Established in the 1980s to speed up the transit of perishable goods such as cut flowers, the Treasury argued it had been exploited in the internet shopping era by large companies selling low-value goods on a large scale and meant £140m a year in tax was now being lost to the Revenue.
Companies on the islands expected to be hit by the clampdown include Indigo Starfish and The Hut, which are used by big UK retailers such as Amazon, Tesco and Asda to fulfil internet orders.
While retailers have the option of relocating to non-EU jurisdictions, including Switzerland, Hong Kong or Chicago, to retain the VAT exemption, this is not the case for more than 2,000 islanders currently employed in the export and distribution trade.
The states of Jersey and Guernsey had challenged the Treasury over the issue in a judicial review, arguing that the government was discriminating against the islands since companies in non-EU jurisdictions would still be able to take advantage of the VAT exemption. A rather silly argument, as I pointed out already in 2008 to the then-Shadow Chancellor.
Hearing the review at the High Court on Thursday, Mr Justice Mitting said: “There is no requirement that the UK should treat non-EU territories as every other.” Referring to the element of the forthcoming finance bill that will remove the VAT exemption for the Channel Islands, he said: “The clause was not unlawful under EU law.”
In his ruling Mr Justice Mitting also agreed with lawyers for Jersey and Guernsey that ending the exemption would have “a severe and adverse effect on employment”. Jersey employs about 700 people in companies that use the exemption, with a further 800 employed indirectly in related sectors. Guernsey has 600 people working in the export trade. But this merely rectifies an unfair advantage the islands have enjoyed for 2 decades.
The Treasury said that scrapping the exemption would ensure that “UK businesses, especially small and medium-sized enterprises, can compete on a level playing field with businesses with operations in the Channel Islands.”
The long-term and blatant abuse has destroyed many UK businesses which, other than for the lack of a 20% trading advantage, would have been viable healthy operations giving people jobs and generating tax revenue in the UK.
What's left for the "States" of Guernsey and Jersey? Declare independence, I dare you!
Unfair tax advantages for GY and JY are history
The Channel Islands have finally lost their legal challenge to stop the UK government terminating a VAT loophole that has enabled retailers to ship tax-free goods including DVDs, greetings cards and vitamin pills from the territories. The exemption, known as low-value consignment relief, has enabled companies based in the islands to escape VAT on goods sold to the UK. It will now be scrapped in the Budget next week.
Established in the 1980s to speed up the transit of perishable goods such as cut flowers, the Treasury argued it had been exploited in the internet shopping era by large companies selling low-value goods on a large scale and meant £140m a year in tax was now being lost to the Revenue.
Companies on the islands expected to be hit by the clampdown include Indigo Starfish and The Hut, which are used by big UK retailers such as Amazon, Tesco and Asda to fulfil internet orders.
While retailers have the option of relocating to non-EU jurisdictions, including Switzerland, Hong Kong or Chicago, to retain the VAT exemption, this is not the case for more than 2,000 islanders currently employed in the export and distribution trade.
The states of Jersey and Guernsey had challenged the Treasury over the issue in a judicial review, arguing that the government was discriminating against the islands since companies in non-EU jurisdictions would still be able to take advantage of the VAT exemption. A rather silly argument, as I pointed out already in 2008 to the then-Shadow Chancellor.
Hearing the review at the High Court on Thursday, Mr Justice Mitting said: “There is no requirement that the UK should treat non-EU territories as every other.” Referring to the element of the forthcoming finance bill that will remove the VAT exemption for the Channel Islands, he said: “The clause was not unlawful under EU law.”
In his ruling Mr Justice Mitting also agreed with lawyers for Jersey and Guernsey that ending the exemption would have “a severe and adverse effect on employment”. Jersey employs about 700 people in companies that use the exemption, with a further 800 employed indirectly in related sectors. Guernsey has 600 people working in the export trade. But this merely rectifies an unfair advantage the islands have enjoyed for 2 decades.
The Treasury said that scrapping the exemption would ensure that “UK businesses, especially small and medium-sized enterprises, can compete on a level playing field with businesses with operations in the Channel Islands.”
The long-term and blatant abuse has destroyed many UK businesses which, other than for the lack of a 20% trading advantage, would have been viable healthy operations giving people jobs and generating tax revenue in the UK.
What's left for the "States" of Guernsey and Jersey? Declare independence, I dare you!
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