UK Government Vows to Prevent the Abuse of LVCR “Regardless of the Location” as Channel Islands Blame other Jurisdictions for the Problem.
|November 12, 2011||Posted by RAVAS under VAT|
HM Treasury have tackled businesses and politicians in the Channel Islands who claim that the Islands are being ‘picked on’ by the UK Government. In a statement a UK Treasury official said “The overwhelming majority of cases where companies are deliberately supplying goods from outside the EU to UK consumers in order to benefit from the current LVCR rules have their operations in the Channel Islands. The vast majority of all international parcel post to the UK from outside the EU is now estimated to originate in the Channel Islands, despite the small size of their economies and populations” .
This statement flies in the face of defiant comments made to the BBC by Robert Sillers CEO of the Guernsey based Sigma fulfillment Group. Sillers was until recently not only running a company taking advantage of LVCR but was also a Guernsey Deputy on the Commerce and Employment board which oversees the interests of Fulfilment Industry in the Island. Claiming to BBC radio that the UK was acting in a discriminatory manner he stated that only 16% of CDs and DVDs originated from the Channel Islands blaming imports from America as the real problem facing the UK.
Ignoring other sectors such as horticulture and the fact that it is the volume of goods that are deliberately circularly shipped from the UK which makes the Channel Islands fulfilment industry abusive, Sillers portrayed Guernsey and his business as the victim of discrimination arguing that it was unfair that Island was now unable to exploit the relief when other jurisdictions could. However this view stands in contrast to the UK Treasury’s statement which clarified that “The Government is committed to ending exploitation of LVCR regardless of location. If evidence emerges that diversion to other jurisdictions is taking place on a significant scale, we will consider the case for additional action, including by extending the dis-application of LVCR rules to supplies from those jurisdictions.”
RAVAS understands that a stronger statement from HMRC regarding avoidance and abuse of LVCR will be issued shortly.
In the meantime accountancy firm Deloitte have claimed that the Channel Islands have a strong case against the UK. Jo Huxtable, a senior tax partner at the firm, claimed to the BBC that EU law only allows the UK to exclude all mail order goods from all destinations - a fact not supported by the wording of the LVCR directive which she misquoted during the interview. Jo Huxtable also claimed that an optional, European import relief operated on a discretionary basis by EU member states, gave non-EU countries an equal right to exploit it.
RAVAS holds large amounts of accurate data supplied by key operators in UK mail order business including distribution and manufacturing. Claims that the Channel Islands are a small players in circular shipping are completely unsupportable. The very fact that major retailers spend money to move to the Channel Islands indicates the importance and scale of the abuse of LVCR.
Guernsey Deputy David Delisle welcomes the UK Governments action describing the fulfilment industry as a’ scam’ that “confronts everybody in the Island with a credibility problem” and that challenging the UK would be a mistake.
Having seen the flimsy arguments, RAVAS agrees.