Guernsey challenges end of Low Value Consignment Relief

Lyndon Trott in front of a Guernsey flag
Image caption Deputy Trott said it had been decided the island had a strong case

The States of Guernsey will launch a legal challenge over the UK's ending of Low Value Consignment Relief, the chief minister has announced.

Deputy Lyndon Trott described the ending of the VAT relief for the Channel Islands as "discriminatory".

The UK Chancellor George Osborne announced last month that the relief for commercial parcels valued at under £15 would end from April.

HM Treasury has estimated the change would bring in an extra £90m in tax.

Deputy Trott said: "Guernsey's Policy Council has decided, based on the legal advice it has received, that we have a strong case that this action by the UK government is discriminatory under EU law.

"This is not a decision we have taken lightly, but we are moving forward under the fundamental premise that it is wrong to discriminate against or be discriminated towards and it is on that issue that our challenge will be mounted."

He said the cost of the action had been estimated at about £60,000 and was likely to last six or seven weeks.

Figures for 2010 showed about 650 people were employed in the island's fulfilment industry, which includes receiving, warehousing, repackaging and sending products.

The Low Value Consignment Relief threshold was reduced from £18 to £15 for all non-EU territories on 1 November.

That change was expected to bring in an extra £15m for the UK Exchequer by 2015-2016.

The ending of the relief, announced last month, affects just the Channel Islands.

The system was introduced in 1983, with a threshold of about £5, as the cost of collecting the VAT on such small value items outweighed what it brought in for the UK Exchequer.

The growth of internet shopping and the relocation of some UK companies to take advantage of the relief prompted some to criticise the Channel Islands as a base for the "exploitation" of the system.

Estimates by HM Treasury found the UK did not receive £130m in 2010 due to the relief, although that did not take into account the cost of collection.

Deputy Trott said the Bailiwicks of Guernsey and Jersey had been advised to mount separate challenges.

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