The governments of the Channel Islands, Guernsey and Jersey, have released statements
in response to the UK Treasury's announcement that from April 1, 2012, Low-Value
Consignment Relief will no longer be offered to goods exported to the UK market
from the Channel Islands.
The LVCR scheme allows goods imported to the UK from non-EU territories to
be sold free from value-added tax (VAT) if they are priced at less than GBP15
since November 1, down from GBP18 previously. The scheme has encouraged many
businesses to set up warehouses in the Channel Islands from which they ship
items such as CDs and DVDs to the UK, and some argue that this has contributed
to the demise of some traditional 'high street' retailers.
However, under legislation announced by the UK Treasury on November 9, LVCR
will continue to apply with the new GBP15 threshold to commercial supplies from
other non-EU jurisdictions, and the Channel Islands feel that they have been
unfairly singled out by the new measures.
In response to the announcement, both governments in their proposed policy
responses have announced that they will challenge the decision. The Guernsey
government has said it would continue to engage in dialogue with HM Treasury
to represent the island in opposition to the blanket removal of LVCR.
On behalf of Jersey, the island's Minister for Economic Development, Alan
Maclean said: “The change will affect hundreds of livelihoods across the
island and in view of this impact, we are taking legal advice in conjunction
with members of industry. We would not want discrimination against the Channel
Islands to go unquestioned, when it has the potential for a severe impact on
islanders.”
Whilst continuing negotiations with HM Treasury, the two territories said they
would be working with their respective fulfilment industries to aid them to
overcome the decision, but admitted that the removal of the concession would
nevertheless have a severe impact on employment, which would require government
support.
According to a statement from the Guernsey government: “The States are
in discussion with companies to investigate and identify ways in which business
models can potentially be adapted to take account of the change/removal of the
VAT threshold within a short transition time. The Commerce and Employment Department
has been working to assess the impact on businesses, the postal and freight
sectors, as well as the economy, and will continue to work with businesses in
order to mitigate the negative impact of this change in the UK’s domestic
tax arrangements.”
Guernsey’s Chief Minister, Deputy Lyndon Trott, said that the impact
of this change is likely to be "significant" for the island:
" We now have two priorities. First, to continue working with businesses
in order to mitigate the negative impact of this change. Second, to continue
the ongoing dialogue with the UK government so that mechanisms can be put in
place to cope with the increased administration that these changes will impose
on the postal and customs services.”
“It is of particular concern that this change has been targeted solely
at the Channel Islands and on all products. The States of Guernsey has worked
with the industry to restrain activity in the sector through the development
of a code of conduct and self-regulation. The success of this work had been
previously recognized by the UK government.”
“The Treasury’s changed policy position on LVCR fails to differentiate
between those businesses that have minimal footprint in the island’s economy
from indigenous businesses. The short time scale and blanket approach are particularly
concerning. We have made our views on this clear to HM Treasury, and we are
working with [our] counterparts in Jersey to continue to do so.”
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