Channel Islands 'can challenge UK VAT decision'

Jo Huxtable said the UK would need permission to deviate from EU law

An international firm of accountants has said the Channel Islands have legal grounds to challenge the ending of Low Value Consignment Relief.

The UK announced on Wednesday that all commercial goods sent to the UK from the bailiwicks of Guernsey and Jersey would be subject to VAT from 1 April.

Currently, LVCR means items priced at less than £15 can be imported tax-free.

Jo Huxtable, a tax partner at Deloitte, said the change was discriminatory and could well be in breach of EU laws.

She said the UK was entitled to increase or reduce the level at which LVCR was set, as it saw fit.

However, she said: "What I think they cannot do is make an exclusion of a particular type of good or indeed a particular territory."

"It's what we call 'a breach of fiscal neutrality'," she said.

Agreement required

The UK treasury said it would publish full details of the change in its pre-budget report on 6 December but has said it will apply only to the Channel Islands.

Goods imported from other non-EU jurisdictions, such as Switzerland, Hong Kong or China, will not be affected.

Mrs Huxtable said VAT was an EU law, operated by member countries.

"What the UK would actually have to do," she said, "would be to seek permission from the European Commission to deviate from the EU law."

"It's called a 'derogation' and that requires the agreement of all the member states," she said.