High Court Decision Confirms End of Channel Islands LVCR Abuse and Clarifies State Power to Exclude Mail Order Goods from LVCR.

On the 15th of March 2012 the High Court in London finally ended the abuse of LVCR from the Channel Islands. You can download the full Judgement here : Judgement LVCR Guernsey 15.3.12

RAVAS (Retailers Against VAT Avoidance Schemes) intervened in the hearing at the last moment in order to submit information to the Court that illustrated how Channel Islands retailers had abused the import VAT relief in order to avoid VAT on mail order sales within the UK.  Thanks to a number of financial contributions from its members at very short notice, RAVAS  was able to mount a powerful challenge to the arguments presented by the Channel Islands,  who fought hard to keep RAVAS out of the hearing. Channel Island retailers  clearly knew that RAVAS  would produce embarrassing evidence of abuse and avoidance.

RAVAS Spokesperson Richard Allen was at the hearing for all three days.  His report follows the video below.

” I was at all three days of the Judicial Review held before Justice Sir John Edward Mitting at the High Court of Justice Queen’s Bench Division Administrative Court in London between the 13th and 15th of March 2012.  It now seems starkly clear that if RAVAS had not intervened in the hearing the UK government may well have lost the legal challenge as their initial defence was very weak. Our intervention in the JR concentrated minds on tax avoidance and the abuse of LVCR which had been the subject of the RAVAS complaint to the EU.  

The initial argument in HMRCs pre-action response letter to Jersey and Guernsey, was that volumes of goods from Channel Islands were high and that this high volume of goods gaining LVCR was distorting the UK market. The UK argued that it was justified in removing LVCR because of this distortion. This argument was thrown out early on in the hearing by the Judge as Mr Grodzinski, QC for Guernsey, argued that the high volumes of LVCR goods were due to the fact the Channel Islands were successful at internet retail and this could not be regarded as a distortion but merely successful competition.  He pointed out that the Channel Islands success was not a good enough reason to discriminate against the Channel Islands. He also queried why HMRC had said they would not be pursuing abuse and avoidance arguments in their pre-action letter, yet in their skeleton argument they had stated they would. He did not understand why HMRC had suddenly changed their position particularly when they had not provided any evidence of abuse or avoidance.   This change in direction was the result of the intervention of RAVAS. At the end of the hearing when costs were awarded, The Channel Islands had a slight reduction in costs due to this last minute change in arguments by HMRC which they claimed had resulted in extra work at short notice.  

The core of RAVAS members provided evidence of the abuse of LVCR and avoidance of VAT in the form of detailed witness statements, which proved crucial to the final result of the hearing.  The statements that RAVAS  provided concentrated on the practices of circular shipping UK products and splitting down single customer orders into individual packages across a number of sectors including CDs, DVDs, Horticulture, Computer Games, Ink Cartridges and Domestic Appliance Spares. The practices of order splitting and circular shipping UK products (to order) are used by Channel Islands retailers so that they are able to factor the LVCR advantage into the individual prices of the goods they sell and offer a comprehensive range of items without holding stock on everything. As a result of our complaint to the The European Commission both of these practices are regarded as abusive and have resulted in LVCR being used for “a purpose for which it was never intended” namely retailing in the UK/EU by mail order VAT free.   Justice Mitting congratulated our legal team on its presentation and at one point, when Jersey’s QC David Vaughan said that circular shipping did not take place, he laughed and said: “The RAVAS evidence would seem to suggest otherwise!” Incredibly, as confirmed by Guernsey’s QC Sam Grodzinski,  HMRC submitted nothing in the way of evidence of the activities of Channel Island retailers to the court. They also appear to have relied initially on internal HMRC lawyers who have proved over the years to have little clue to what was going on in relation to LVCR abuse. Once HMRC went out to independent counsel things improved dramatically and Phillippa Whipple QC, who worked closely with our legal team, was excellent. 

Essentially the heart of the Channel Islands case put forward mainly by Mr Grodzinski was that:

* The term  mail order did not include internet retail; 

* The wording of the LVCR directive was not clear, so the UK could only exclude all mail order goods from LVCR — not just from the Channel Islands;

* The UK was discriminating against the Channel Islands under the EU concept of Fiscal Neutrality, which they argued meant that member states of the EU had to not only treat other EU states equally but also non EU states.

 Justice Mitting addressed Miss Whipple (HMRC) early in the hearing stating that the nub of the case was whether or not the UK could exclude the Channel Islands selectively from LVCR . He stated “If you are right on that point you win but if you are wrong your case collapses” . Miss Whipple countered the fiscal neutrality and discrimination arguments referencing EU case law that supported legitimate trade sanctions placed on imports of mushrooms from Taiwan by Italy.  She clarified that fiscal neutrality was a concept of the internal EU market and that LVCR was a relaxation of fiscal neutrality for administrative purposes adding that the UK was obligated to prevent LVCR being abused for tax avoidance.  She stated that LVCR was being used for exactly that purpose by Channel Islands retailers and that removing mail order goods would actually restore fiscal neutrality. She also addressed order splitting quoting case law involving a Cosmetics retail operation, and stated that Channel Islands businesses were structured in such a way that  a single economic activity was being broken down in a manner that created a series of artificial smaller transactions, so as to take illegitimate advantage of a fiscal opportunity.  She went on to point out that there was a complaint at the European Commission regarding Channel Islands use of LVCR that had been upheld and that this obligated the UK to act and prevent this abuse avoidance and distortion. Miss Whipple pointed out to Justice Mitting that the UK would face infraction proceedings by the European Commission if it did not end this abuse.  

 On the question of the definition of mail order Justice Mitting stated early on in the proceedings that, as HMRC argued, mail order could be defined as any sale made under a distance selling arrangement. He said that it could not be reasonably confined to orders placed by mail and gave a history of mail order since the 1800s to prove the point, arguing that customers  had placed orders by telephone and fax for many years and that this had been regarded as mail order, so why not by email or online ?  

RAVAS’s counsel Christopher Vajda QC — and his team of Valentina Sloane and Julianne Stephenson — delivered a superb 45 minute presentation pointing out to Justice Mitting that the UK had complete discretion with regards to the way it exercised the mail order goods exemption; a power to exclude mail order goods from LVCR that has been granted to member states by Article 23 of  the LVCR directive since 1988. Mr Vajda also pointed out that the UK was obligated under Article 1 of the LVCR directive to “apply the exemptions” under “conditions fixed by them” to prevent any evasion avoidance and abuse.  Justice Mitting however seemed unconvinced as to whether Article 1 could actually impose “conditions” on Article 23, if Article 23 resulted in the removal of mail order goods altogether.  Mr. Vajda reminded the Judge that he should not be preoccupied with technicalities of construction and that this case had to be viewed not from an Anglo Saxon viewpoint but from the perspective of European Law which was based upon intent. He added that if this was the Chancery Court in 1845 he would agree with Justice Mitting but it wasn’t and under EU law the intent of the directive was to allow a limited breach of fiscal neutrality whilst also obligating member states to prevent avoidance, abuse and distortions of competition arising from LVCR. Mr Vajda stated that all of these elements were clearly highlighted in the LVCR directive and that the power to exclude mail order goods under Article 23 could be used to impose a condition that would satisfy Article 1 and prevent avoidance and abuse. Because the power to exclude mail order goods was an unfettered by any limitation the UK had the discretion to apply it to just the Channel Islands. This he argued, was the correct interpretation of EU law. 

Unfortunately Justice Mitting doubted that items other than mail order goods would benefit from LVCR and he therefore concluded  that excluding mail order goods was effectively removing the exemption completely. He therefore dismissed Mr Vajdas argument that Article 1 could impose conditions on Article 23 if Article 23 removed LVCR completely.  This was a factually flawed conclusion since LVCR does indeed not just apply to mail order goods but also exempts from VAT ‘merchandise in baggage’ carried by travellers, and commercial consignments ‘not for sale’ with a ‘negligible value’ such as manufacturing parts, artwork, replacement spares, photographs, media storage devices,  samples and so on.  LVCR was originally introduced in order to relieve administration on exactly these  kinds of ‘negligible value’consignments  when customs borders still existed within the EU and goods often had to pass through more than one internal customs border.  It follows therefore that if only mail order goods have been exempted from Channel Islands goods qualifying for LVCR, that LVCR still applies  to  ‘merchandise in baggage’ and commercial consignments not for sale. LVCR has therefore not been removed completely from the Channel Islands contrary to press reports that state LVCR has been ‘scrapped’.  

Justice Mitting did however accept Mr Vajda’s point that other EU VAT exemptions with similar powers were limited in some form if limitation was intended and therefore, the UK could clearly do what it wanted. In retrospect this was probably the key moment of the hearing and its significance has been entirely missed by the media.    

The last day and a half seemed to go really badly for RAVAS/HMRC. It appeared that the Judge was on the side of the Channel Islands and was going to rule against HMRC/RAVAS. Justice Mitting made a comment about the UKs responsibility to the economies of the Crown Dependencies but Mr Vajda reminded Justice Mitting that this was a court of law not a political arena. Justice Mitting also appeared sympathetic to Channel Island retailers that were having to close (he failed to mention the many UK retailers that have suffered) and made a generalised comment about the exploitation of a legitimate fiscal measure such as LVCR not being abuse and avoidance. Whilst he did unconditionally accept that circular shipping was an abuse he seemed to regard it as a rare practice rather than the norm. His view on order splitting and avoidance of VAT was equally confused.  He suggested that Channel Island retailers were doing nothing beyond accepting orders from customers and supplying them, in the ordinary course of their trade.  He went on to say that the fiscal advantage afforded by LVCR gave Channel Island retailers an economic incentive to conduct that trade from the Channel Islands, but because this was the ordinary course of their trade, this was not abusive. He pointed out that since VAT on importation was payable by the consignee, the customer was avoiding VAT not the Channel Islands retailer.  These conclusions are inaccurate because splitting single customer orders down into multiple packages is clearly not ‘the ordinary course of  trade’ and VAT in the Channel Islands on mail order is payable by the sender not the customer due to the pre-paid VAT scheme that operates in the Islands.  

The reality is that abuse of LVCR which Justice Mitting had accepted in his Judgement was not the exception but the norm. The widespread abuse of LVCR is underlined by the fact  that LVCR simply cannot be exploited in the ‘ordinary course of trade’ without circular shipping and order splitting – facts that are public knowledge in the entertainment retail business. Justice Mitting admitted, however, that determining the level of abuse was not required in order to deal with the legality of the UKs legislation which was the purpose of the hearing. It is also unsurprising that he was confused about the levels of abuse  given he had only seen one-sided, unchallenged submissions from Channel Island retailers! RAVAS did not get to see what the Channel Islands businesses had put in as evidence because the Channel Islands had demanded that whole sections of their skeleton arguments were redacted. As a result we couldn’t directly counter what they had said, a state of affairs strongly objected to by our QC Mr Vajda.   

It is also interesting to note that in response to evidence RAVAS submitted to the court of order splitting Channel Islands traders submitted  statements  that claimed items were being sent individually not to avoid VAT and claim LVCR but to make things more convenient when packing and to make sure packages could fit through customers letterboxes! (even though one of our examples of order splitting related to a box set that wouldn’t fit through a letterbox!). Not only is this odd practice of ‘convenient’ single item packing unique to LVCR abusers but the statements given to the court highlight a major contradiction, in that Channel Island retailers claimed LVCR wasn’t important to their business but at the same time told the court that if LVCR was removed on mail order goods they would have  to close down their businesses ! .

In any event the issues of abuse and avoidance addressed by the Judge were Obiter Dictum (passing comments) and were not the subject of the JR.  Claims from Channel Islands politicians and businesses that LVCR use for mail order as practised in The Channel Islands is now legitimate  are not accurate. In theory the use of LVCR could be legitimate if only genuine, complete orders qualified for the relief  but the artificial splitting of single orders for multiple items into individual packets along with circular shipping UK goods are methods used by retailers to incorporate the benefit of the import exemption into their pricing structure so they can sell VAT free in the UK. That is clearly not a legitimate use of the relief and is clearly an abuse indeed if LVCR is applied correctly by member states free of avoidance evasion or abuse it cannot be used as an ‘economic incentive‘ for mail order as suggested by Justice Mitting.  The test of abuse is therefore whether the relief is being used as an ‘economic advantage’.  

 Justice Mitting read out his final Judgement just after 3 ‘o’ clock on the 15th of  March. He gave a lengthy presentation detailing all the issues. It was a very tense moment as the final operational part of the Judgement was read out.  In the very last part of his judgement Justice Mitting ruled against the Channel Islands. He ruled that the power to exclude mail order was unfettered by any limitation, a point that had been highlighted by Mr Vajda and further concluded that Fiscal Neutrality only applied between member states and not between an EU state and a non EU country, as Miss Whipple had argued and as has been outlined on the RAVAS website.  Justice Mitting ruled the UK therefore had the power to exclude mail order goods if it wanted and could discriminate against the Channel Islands if it also wished to do so.  

HMRC with the assistance of RAVAS soundly defeated the Channel Islands which had used, amongst others, Price Waterhouse Cooper to represent them.  I estimated that there were also 30 lawyers in the room representing various major retailers and Channel Islands firms. One lawyer I spoke to represented six companies. The Channel Islands had tried to suggest that RAVAS was backed by a supermarket and demanded to see our membership list. They must have been surprised when they saw we were a group of angry little guys. It was David and Goliath stuff. 

As Judge Mitting put down his paperwork, having concluded his judgement, he smiled at the assembled army of lawyers and said “Does anyone want anything kept confidential?”  David Vaughan the QC for Jersey responded in a rather despondent tone “Only the result….”

David Greene, a partner at Edwin Coe, who represented RAVAS, summed up the final ruling in a statement to the Guardian  “RAVAS and its members have been campaigning for the past 10 years to abolish the loophole that allows retailers based in Jersey and Guernsey to avoid VAT on low value goods ordered over the internet by UK consumers. As a result of RAVAS’s pleas to the European commission, the UK government clamped down on this abuse. UK retailers have been seeking an even playing field but have been competing with supplies from the Channel Islands with one hand tied behind their back.”

Whilst LVCR abuse is not completely dead yet RAVAS has successfully helped the EU clarify the mail order exemption power in the LVCR directive. Member states are now free to exclude mail order goods that originate from non-EU territories being used as a base for abusing LVCR. The power to exclude mail order goods selectively is a very powerful weapon and makes LVCR fulfilment a far less certain prospect for those who wish to make VAT avoidance a core part of their retail strategy.

RAVAS will be continuing this battle at www.ravas.org.uk

RAVAS intervenes in Channel Islands attempt to overturn LVCR Legislation

RAVAS, the group of UK retailers that successfully campaigned to convince the Government to end the VAT avoidance arrangement known as ‘The Channel Islands VAT Loophole’, has intervened in the judicial review of the UK Governments legislation that ends the loophole. The judicial review has been initiated by the Governments of Jersey and Guernsey who claim that the legislation is discriminatory and illegal.

The VAT Loophole, which enabled companies who could route their operations via the Channel islands to avoid charging VAT and hence undercut onshore competitors, was responsible for the rapid rise of Play.com, who first introduced the concept of VAT free mail order and free delivery on CDs and DVDs. Unsurprisingly this popular marketing ploy helped Play.com grow into a multi-million pound online retailer within five years. It also encouraged a boom in similar mail order operations who sell everything from health supplements, cosmetics, contact lenses, computer memory cards, ink cartridges, car parts, plants and flowers..

The import VAT relief at the centre of the argument is called Low Value Consignment Relief (LVCR) and was introduced in 1984 for the purposes of minimising administration costs for member states. It exempts from VAT any import from outside the EU below a threshold value and since the Channel Islands are outside the EU for VAT purposes they have been able to take advantage of it. LVCR was however, never intended to be used as a source of competitive advantage and companies exploiting it in this way are abusing it.

LVCR abuse involves exporting goods to The Channel Islands in order to re-import them to UK customers VAT free, a behaviour that is known as ‘circular shipping’. Where customers have placed a single order for multiple items they receive them in individual packets so as to gain VAT relief from LVCR. Critics point out the massive carbon footprint created by this industry with excess packaging and pointless extra journeys.

Some mail order sectors are now dominated by the Channel Islands with the majority of new CDs bought online sold through the Channel Islands. Despite the overall decline in music sales, online sales of CDs increased by 40% between 2005 and 2009 yet nearly all the pure-online music retailers on the UK mainland have gone out of business unable to compete with VAT free retailers.

Following a successful complaint by RAVAS to the European Commission and in accordance with the coalition Government’s pledge to tackle tax avoidance, Chancellor George Osborne announced an end to the Channel Islands’ use of LVCR in the 2011 Budget.  In November of 2011 after discussions with the EU the UK Government announced that LVCR from the Channel Islands would be scrapped completely as of the 1st of April 2012 in order to “bring increased fairness for UK businesses, benefit the UK economy and protect millions of pounds in tax revenue”.

In response The Channel Islands have initiated a judicial review of the new legislation claiming that it is illegal and discriminates against the Islands. RAVAS maintains that the UK’s change is entirely lawful and that it has been enacted in order to specifically deal with the overwhelming abuse of this import VAT relief, an abuse that is specific to the Islands, making the action entirely proportionate.

Spokesperson Richard Allen explained the reason for the intervention “Although we had effectively ended our campaign it was clear that powerful commercial interests were involved in the Channel Islands challenge to the UKs LVCR legislation.  We felt that we could not remain silent if those commercial interests were going to be closely involved with the  move. The LVCR trade is a complex area of law and commerce and clearly HMRC need assistance from businesses that not only understand how it works but whom also understand at first hand the insidious distortionary effects of this VAT abuse.   The long term and blatant abuse has destroyed many UK businesses that other than for the lack of a 20% trading advantage would have been viable healthy operations giving people jobs and generating tax revenue in the UK. Whilst we of course have sympathy for the effect on employment in the Channel Islands that the closure of this industry will have, it is for the people of the Islands to strongly question their elected representatives as to how they could possibly allow an industry that was based on the abuse of tax to become so important to the Islands economy. Not only did a report commissioned by the Jersey Government in 2005 outline that LVCR was the only reason that the fulfilment industry existed on the Islands but it also warned that the tax exemption that was being exploited was controlled by the UK and could be removed at any time. Now companies are closing up shop they cannot claim their trade was not entirely reliant on LVCR

The hearing takes place in London on the 13th to the 15th of March at the Administrative Court in The Strand. It is hoped that a precedent will be established that rules that LVCR’s use for VAT free mail order is abusive.



  1. 1.      Reference :

What Is The Contribution of The Fulfilment Industry to Jerseys’ Economy?  – An Economic Growth Plan Sectoral Study – Report Prepared for the States of Jersey April 12th 2005

    1.1.2 Why does the Industry Locate in Jersey ?

The Principle reason for the industry to locate in Jersey is that goods of relatively low value such as CDS and DVDs are exempt from VAT levies on the purchaser when shipped from Jersey to the UK ….. hence the  location of the fulfillment industry in Jersey depends on making use of an opportunity of tax arbitrage…If the LVCR were to be abolished and the UK were to levy UK VAT on the goods the companies may leave Jersey altogether since the possible gains from the tax arbitrage would be lost

 3.4 – Competition from Other Jurisdictions and Abolition of the LVCR

A number of companies stated that the association of some third party fulfillment service providers with high-profile UK based companies raised the profile of the industry. The increased attention by the media and EU Governments and the future growth of the worldwide fulfillment industry may thus increase the risk of a withdrawal of the scheme”

5 – Summary and Conclusion –

“The most significant concern of the fulfilment industry is that the LVCR threshold may be reduced or removed altogether “

RAVAS is an independent pressure group of UK retailers that has successfully fought to end the exploitation of LVCR via the Channel Islands.

It’s over! The final word from RAVAS Spokesman Richard Allen.

At the bottom of this posting is the song I listened to when I had to close my mail order company The Freak Emporium, in December 2007, after 16 successful and enjoyable years in business. By 2007 it was simply no longer possible to compete from the UK mainland as a result of a major market distortion in online music retail. This distortion had been caused by the abuse of LVCR which had caused all mail order sales to move offshore and drop to price levels within the VAT advantage that was enjoyed by those abusing LVCR. The choice I had was to either close down the business completely or try and move offshore.  Much to the disappointment of customers I wasn’t prepared to join in and move offshore. Even if I had decided to do so, that would not have saved the knowledgeable and loyal staff who lost their jobs at my UK office. The injustice of the situation outraged me and when I saw that other retail sectors were going the same way I felt I had to do something about it. Before long other like minded people had joined with me and together we formed Retailers Against VAT Avoidance Schemes and submitted a complaint to the European Commission in 2007.

Now after a long campaign things have come full circle and LVCR abuse from the Channel Islands is also finally ‘over’.

At RAVAS we hope that this kind of tax avoidance market distortion will never be allowed to develop again in the UK. Whilst it’s not going to be possible to completely stop people cheating the tax system – and to quote Churchill “The English never draw a line without blurring it” –  it is highly unlikely that we will ever see again the kind of mechanised, industrial, mass VAT avoidance that was supported by almost every high street brand name in the UK. We firmly believe that, now the loophole is closed, Channel Island companies should be able to compete on a level playing field and develop sound business models that are not utilising tax avoidance to adjust their pricing so as to put other retailers at an immediate and unfair disadvantage.

RAVAS is not planning on discussing this issue any further on this website and comments to all postings are now closed.

We would like to thank everyone who was involved in this campaign or supported us particularly the many retailers (large and small) trade bodies, journalists, magazines, blogs,  Channel Islanders, MPs,  legal and accountancy professionals and UK Government and EU officials who helped us end the abuse of LVCR in the UK. Special thanks to Christopher Vajda QC and Valentina Sloane, Lord Lucas, Richard Murphy, Martin Smith, Helen Smith at IMPALA, Chris Holgate, Alison Wenham at AIM, Bob Jones of Littlejohn LLP and John Biggs of Wellow Business Services.

We have demonstrated that if European law is being breached it is possible to make a successful complaint to the European Commission and we would encourage anyone who is facing similar issues to follow that same process. In theory EU law relies on both the Commission and individuals to police the Treaties.  It takes a long time and involves a lot of effort but we can confirm it works!

RAVAS will continue to monitor the LVCR situation with other jurisdictions such as Switzerland and will continue to strive for equality and fairness in the application of VAT and EU taxes in general. We note the unbelievable cries of unfairness and discrimination emanating from the abusers of LVCR and trust that this will fall on deaf ears on behalf of all those that have suffered from the abuse.

RAVAS will reactivate and intervene as and when required. You have been warned.

If you need to contact us please do so here.  Thank-you all.

Richard Allen – RAVAS

Guernsey Minister Responsible for ‘Fulfilment’ Industry Claims Island did not Encourage LVCR Abuse and that UK Retailers did not Move to the Island to Avoid VAT

Richard Allen spokesperson for RAVAS confronted Deputy Carla McNulty Bauer Minister for  Commerce and Employment in Guernsey who worked in the Fulfilment industry and was involved in HMV’s move to the Island in 2004.

During the exchange Deputy McNulty Bauer stated that she did not encourage companies to set up their internet operations in Guernsey and that retailers were not moving to Guernsey to avoid VAT. Deputy Peter Sirett who also appeared on the programme echoed Deputy McNulty Bauer’s comments stating that companies moved to the island for reasons other than VAT avoidance.

Deputy McNulty Bauer was challenged on the programme by a caller over her claim that HMV was allowed to set up operations on the Island because it was prepared to open a shop and invest money in the Island rather than just set up a ‘brass plate’ fulfilment operation. This distinction between a ‘brass plate’ company with no presence on the Island and the existence of a genuine record shop would appear to be questionable and it seems improbable that HMV would avoid a cheaper,  purely ‘brass plate’ operation unless investing money and setting up a shop was a condition of their moving to Guernsey to take advantage of LVCR. Deputy McNulty Bauer failed to acknowledge that the Guernsey Government had encouraged the creation of jobs and employment on the back of an import tax relief which was governed by a non discretionary obligation on the UK to prevent it being used for VAT avoidance.

Two excerpts from the programme can be found in the audio clip below:

UK Government Vows to Prevent the Abuse of LVCR “Regardless of the Location” as Channel Islands Blame other Jurisdictions for the Problem.

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.