Following our blog of November 14 2011  noting that questions were being raised about the legality of the UK blocking low value consignment relief (LVCR) only on goods entering the UK from the Channel Islands (and not from other non EU locations), these legal challenges have now failed.

Jersey and Guernsey lost their cases after three days in the High Court to try to stop the UK Treasury ending LVCR. The islands were also ordered to pay half the UK government’s legal costs. Both island governments are considering an appeal.

Giving Channel Island ministers permission to challenge his ruling, the judge said the EU was a “complex organism” and the case covered a “difficult area”. However, Mr Justice Mitting said there was no legal requirement that the UK government should treat one territory the same as another.

The trade is worth hundreds of millions of pounds a year and approximately 1,500 workers in Jersey and about 600 workers in Guernsey could lose their jobs.

The decision, which will see the UK government end the tax relief to the Channel Islands from the start of April 2012,  is expected to have a significant impact on the economies of both Jersey and Guernsey.

For advice on this or any other VAT matter contact Sarah Franklin on 01962 735350.