Guernsey States 'disappointed' by VAT challenge ruling

States of Guernsey and Royal Court building
Image caption A spokesman for the States said an appeal would be considered

The Channel Islands' failure to stop the UK Government scrapping importation tax relief is "disappointing", the States of Guernsey said.

The UK High Court ruled ending Low Value Consignment Relief (LVCR) for just the Channel Islands and not other non-EU members was not discriminatory.

A States spokesman said it was considering its response.

He said work would also continue towards mitigating the effects of the ending of the VAT relief.

The spokesman said: "The various departments of the States of Guernsey have been working hard to address the issues surrounding the removal of LVCR and further statements on this matter will be made once we have had an opportunity to examine this afternoon's outcome in detail."

He said those discussions would also include whether or not to appeal the decision.

In 1983 LVCR was brought in to speed up the transit of low-value goods, which might otherwise be delayed by customs, and to reduce costs as collecting VAT on small-value items was found to be higher than the value of tax it brought in.

Image caption Mr Brouard said the end of LVCR would impact on freight and postal services

The relief means no VAT is charged on any goods valued less than the threshold when they are sent from anywhere outside of the European Union to the UK.

That threshold was reduced from £18 to £15 in November after the UK Exchequer found it had meant £130m of tax had not been collected in 2010, which it estimated was higher than the cost of collection.

The Exchequer then announced the ending of the relief from 1 April for the Channel Islands but not other non-EU destinations.

The relief benefits the island's fulfilment industry, which includes receiving, warehousing, repackaging and sending products, which in 2010 employed about 650 people.

In the same year the industry had a turnover of £300m across a range of business sectors including CDs and DVDs, computer accessories and memory cards, flowers and plants, vitamins and health supplements, greetings cards and beauty products.

Rodney Brouard, chairman of the Guernsey Bulk Mailers Association, said the loss of LVCR would hit smaller companies hardest.

Image caption Health supplement company Healthspan said its distribution centre would be moved off island

He said it would result in more unemployment from within the fulfilment industry, as well as affecting freight and local postal services, the majority of which he said relied heavily on bulk mail.

He said it was unfair that companies in Switzerland, Hong Kong, mainland China and the US would be able to ship into the UK from a far more advantageous position than the Channel Islands.

Following the announcement health supplement company Healthspan confirmed plans toclose their Pitronnerie Road warehousewith the loss of 20 jobs.

In a statement the company said: "The benefits of distribution of products out of Guernsey with the loss of LVCR mean that our distribution centre will now have to move to a new jurisdiction by the beginning of April.

"We will be advising the new location for our distribution centre in due course. However, we can confirm that it will not be in the Channel Islands or the UK."

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