Guernsey company threatens to take UK to court on VAT abuse

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A Guernsey company is threatening to demand a judicial review in the UK of the decision to end Low Value Consignment Relief from Guernsey and Jersey in April next year to sop the long running VAT abuse these islands have tacitly encouraged. As the BBC reports:

Guernsey firm Healthspan has announced it is launching a legal challenge to the UK's decision to end VAT relief on Channel Island goods. Derek Coates, the group's chief executive, said: "We are in the process of launching a legal challenge, perhaps in the form of a judicial review." He said it followed advice from accountants and UK lawyers and would be pursued "on the basis of discrimination against the Channel Islands".

He justified this by saying:

"What is surprising and disturbing for all the Channel Islands is the way the UK have treated our islands with such disdain.  They have taken no steps to stop LVCR imports from any other country outside the EU including Switzerland, Cyprus, Hong Kong, the USA or China."

My advice to Mr Coates is he should not waste his money. As Richard Allen at RAVAS explains:

A group of retailers headed by a Health supplement mail order company is threatening to take the UK Government to Judicial review over the removal of LVCR from the Channel Islands. It is not understood exactly what the challenge would be but since the UK not only has the option to allow or disallow LVCR but also the discretion to apply LVCR in a manner that prevents tax avoidance and the abuse of the relief,    the argument would appear to rest on whether or not operating a mail order and fulfilment business from the Channel Islands, in order to use LVCR to retail VAT free  on the UK mainland, is an abuse .

RAVAS understands that the UK Government took action after clarifying the legal issues with the European Commission who are not only supportive of the UK’s removal of LVCR from Channel Island mail order goods but responded to a complaint from RAVAS that the UK had failed to take action to prevent an abuse of the import VAT relief.  The UK is obligated by both the LVCR Directive and the Principle VAT Directive to prevent LVCR being abused and used for tax evasion and avoidance particularly if it leads to a distortion of competition in the UK. One of the measures available under the LVCR directive to combat abuse  is to exclude mail order goods from the relief.

In other words - a judicial review has no hope at all.

Time to accept the abuse is over, I say.