European Union - Value added tax - Government proposing removal of low-value consignment relief in respect of certain goods imported by Channel Islands
R (on the application of Minister for Economic Development of the States of Guernsey) v Revenue and Customs Commissioners and another case: QBD (Admin) (Mr Justice Mitting): 15 March 2012
The instant proceedings concerned the import of goods by mail order from the Channel Islands. Article 143 of Council Directive (EC) 2006/112 (on the common system of value added tax) (the 2006 directive) required member states to exempt from tax the importation of goods of low value from the Channel Islands.
That was achieved by articles 143(b) and (c) and article 23 of Council Directive (EC) 2009/132 (determining the scope of article 143(b) and (c) of directive 2006/112/EC as regards exemption from value added tax on the final importation of certain goods) (the 2009 directive). The exemption was commonly referred to as low-value consignment relief (LVCR).
However, article 23 contained a proviso which stated that ‘member states may exclude goods which have been imported from mail order from the exemption’. In November 2011, the chancellor of the exchequer announced that LVCR would be withdrawn for all goods imported on or after 1 April 2012 from the Channel Islands. The position was subsequently more precisely set out in a draft clause to be included in the Finance Bill 2012, which amended the Value Added Tax (Imported Goods) Relief Order 1984, SI 1984/746 so that the exemption did not apply in relation to any goods sent from the Channel Island under a distance selling arrangement. ‘Distance selling arrangement’ was defined as ‘any transaction, or series of transactions, under which the person to whom the goods are sent receives them from a supplier without the simultaneous physical presence of the person and the supplier at any time during the transaction or series of transactions’. The claimants applied for judicial review of the decision to selectively disapply LVCR.
The principal issue that fell to be determined was whether the defendant was entitled to selectively disapply LVCR. The claimants submitted that: (i) as a matter of language, the proviso of article 23 did not permit selective disapplication, either by reference to categories of goods or territories; and (ii) selective disapplication offended the principles of fiscal neutrality, non-discrimination and proportionality. The application would be dismissed.
(1) EU case law demonstrated that the principle of fiscal neutrality was limited. It was never applied and did not apply to the treatment of goods and services produced in non-member states, until they had entered into free circulation in the EU. The EU and, by necessary extension, member states, when permitted to do so or not prohibited from doing so by union legislation, might, for any reason or none, discriminate against non-EU states in relation to the import of goods from them; even in the field of indirect taxation. The principle of fiscal neutrality was not, therefore, engaged in that context. There was no requirement that the UK should treat one non-EU territory in the same manner for the purposes of LVCR as any other, or as every other. For the same reasons, the principle of proportionality was also not engaged (see ,  of the judgment).
In the instant case, there was no principle of EU law which required the UK to treat the importation of low value goods on mail order from the Channel Islands in the same manner as similar goods from any other non-EU territory. Further, there was nothing in the words of article 23 to prohibit a selective disapplication of the proviso. Accordingly, there was no reason to construe the words narrowly to achieve that result (see  of the judgment). Accordingly, the draft clause was not unlawful under EU law (see  of the judgment).
David Vaughan QC and Conrad McDonnell (instructed by PwC Legal) for the States of Jersey; Sam Grodzinski QC and David Yates (instructed by law officers of the Crown) for the States of Guernsey; Philippa Whipple QC, Jessica Simor and Suzanne Lambert (instructed by HMRC solicitor’s office) for the defendant; Christopher Vajda QC, Valentina Sloane and Julianne Stevenson (instructed by Edwin Coe) for the interested party.