Guernsey urging UK to return VAT relief

Guernsey's government has begun negotiations with the UK aimed at reintroducing VAT relief for some items exported from the island.

Low Value Consignment Relief (LVCR), under which some goods were sent to the UK VAT free, ended for the Channel Islands in April.

That led some large companies to move their warehouses out of the islands.

Guernsey's Commerce and Employment Department hopes to reverse damage caused to smaller local businesses.

The UK government ended the relief for the Channel Islands due to the increase in goods being sent to the UK after online businesses moved to the islands to make use of the relief.

It continues to apply to other areas outside the European Union and means no VAT is charged when goods under £15, such as CDs, are sent to the UK.

Commerce and Employment Minister Kevin Stewart said: "A lot of the firms have moved out of Guernsey to America, to Holland, to Switzerland, so that hasn't really solved anything from the UK's point of view.

'Collateral damage'

"So there's still a chance to have some sort of dialogue."

LVCR was brought in in 1983 to speed up the transit of low-value goods, which might otherwise be delayed by customs, and to reduce costs as collecting VAT on small-value items was found to be higher than the value of tax it brought in.

However, HM Revenue and Customs discovered the value of the tax had become higher than the cost of collection and reduced its threshold from £18 to £15 before scrapping it.

Deputy Stewart said: "I'm very concerned (that) some of the growers, particularly those who grow flowers, have been collateral damage."

Rodney Brouard, managing director of Stan Brouard Group, said the company had been "devastated" by being unable to sell flowers to the UK without charging VAT and had lost 80% of its business.

He said a lot of their work for local and UK companies had gone to other businesses in the UK.