Following our news article last week that the UK government had announced that the Low Value Consignment Relief which allowed the VAT-free import of goods to the UK would be abolished - but only for the Channel Islands - (Government Announces Abolition of VAT-Free Imports from the Channel Islands) - the Islands' governments and retailers have responded that they will fight the new measure.

Guernsey’s Chief Minister is reportedly concerned that the new policy "fails to differentiate between those businesses that have minimal footprint in the island’s economy from indigenous businesses" - distinguishing those businesses which have arguably relocated from the mainland to exploit the VAT 'exemption', from smaller local businesses.

Healthspan, which is also based in Guernsey, has announced that it intends to challenge the UK government's "discrimination" against the Channel Islands, since businesses from other non-EC territories will continue to benefit from the Low Value Consignment Relief for goods with a value of less than £15, so they can undercut Guernsey businesses (or take more profit) as their price to mainland UK customers will not include VAT.

There is a principle of Freedom of Establishment in EU law, which broadly entitles a business to carry on an economic activity in a stable and continuous way in one or more Member States. Healthspan's complaint appears to be that the new rules discriminate against businesses operating in the Channel Islands, which would distort competition with other territories. Of course mainland UK businesses that have not been able to benefit from the VAT 'exemption' exploited by their competitors 'in' the Channel Islands, would argue that competition has already been unfairly distorted for a long time.

Article Added Thursday, 17 November 2011 | 725 Hits

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