Jersey Post has gained permission to raise stamp prices later this year, as the Channel Islands prepare for the impact of the UK's decision to end VAT relief
The UK Government's decision to remove Low Value Consignment Relief (LVCR) for imports to the UK from the Channel Islands will be enforced from April 1 and will mean that Jersey Post will lose revenue because there will be fewer packages leaving the island.
LVCR allows online retailers to ship items under £15 to the UK without needing to pay VAT. It was introduced in 1983 as a discretionary relief, but many Channel Islands-based mail order companies eventually came to rely on LVCR to remain competitive. However, some UK-based firms view the VAT relief as a form of unfair advantage over other retailers.
Jersey's economic development minister Senator Alan Maclean was reported to have said that the UK appeared to be "discriminating against the Channel Islands" for scrapping LVCR in their territory but not in other non-EU jurisdictions.
This week, the Channel Islands Competition Regulatory Authority agreed that Jersey Post can raise its stamp prices later this year to make up the revenue shortfall, as part of a review of Jersey's postal sector.
John Curran, head of the Channel Islands Competition Regulatory Authority, said: "The threat to the island's fulfilment industry is of great concern... we recognise that the short time frame within which the rules on LVCR will change presents a major challenge to Jersey Post.
"We need to ensure that Jersey Post can provide the universal service, which it is required to do under the Postal Services Law. We believe this can be done through a combination of price changes and further efficiency savings from Jersey Post."
Chief Minister Ian Gorst and Senator Sir Philip Bailhache, the Assistant Minister with responsibility for foreign affairs, announced a legal challenge to the UK Government’s move to end LCVR last month, but experts believe the cost of mounting such a challenge – backed by the EU – could run into millions.
Economic Development Minister Alan Maclean said that twin legal challenges from Jersey and Guernsey would be made and that he has written to the UK Treasury to inform them of the move.
But a source tells Telegraph Expat they believe the UK would have had a legal assessment by the EU before making the decision to end LVCR, and that the Jersey challenge could prove fruitless.
Lawyers have estimated the legal costs to be as high as £5 million and the complicated appeal process could take years.
While the Channel Islands are concerned about the impact on its industry, the anti-LVCR lobby say the relief undermined the values of the common market.
Richard Allen, a UK businessman whose company is claimed to have gone under due to the advantage handed to Channel Island businesses, appealed to the EU, who ruled that the practice was abusive and instructed the UK Government to take action.
"If the UK fold on this, they are essentially giving anyone the ability to avoid VAT via LVCR," he said. "The mail order industry should be a level playing field."