VAT and the Channel Islands

Attempts to stop the introduction of more stringent VAT rules on low value goods sent from the Channel Islands have been averted.

The Chancellor had announced last November the removal of the Low Value Consignment Relief (LVCR), which had allowed goods shipped from the Channel Islands worth less than £15 to ship VAT free.

Its abolition, from 1st April, was challenged by the Jersey and Guernsey governments, which said the move was discriminatory and illegal.

However, Law Lord Mr Justice Manning said the Treasury was within its rights to end the relief.

"This is a victory for common sense in what has become something of a case of David v Goliath," said Forum of Private Business senior policy adviser, Phil McCabe.  "But the judiciary has today reaffirmed what George Osborne said in November, that LVCR  is tax abuse and avoidance, plain and simple, and has to stop."

"Unfortunately it is too late for countless small firms which went to the wall, unable to compete with giants such as Amazon and Tesco, who have been able to unfairly use this loophole to avoid paying billions in tax and undercut their small rivals by significant margins."

"Had the government's decision been overturned there would have been serious consequences for high streets across the UK."

The real question is now whether the big companies will put up their prices by 20% or whether they will absorb the cost in the short term.