Consumers set to pay more as Jersey introduces sales tax
2nd May 2008UK consumers could end up paying more for goods and services bought from Jersey when the island introduces a sales tax (GST) on 6 May.
The goods and services tax (GST) will be charged at a starting rate of 3% on most goods and services sold within Jersey. A number of European suppliers of CDs, DVDs and contact lenses sell their goods to UK customers from Jersey as there is no VAT/GST regime and no UK VAT levied on low-value imports entering the UK. Exported goods from Jersey will remain VAT/GST-free, but suppliers will have an increased administrative burden to prove they are indeed exporting their goods and therefore not liable to pay the new tax.
"A 3% starting rate may seem nominal but it's going to push up suppliers' costs - and such increases typically hit the consumer's pocket," said Hannah Dobson, VAT director at accountants, tax and investment management group Smith & Williamson.
"Jersey has guaranteed that GST will remain at 3% for at least three years. But given that standard VAT rates in the EU, UK and France are 15%, 17.5% and 19.6% respectively, after three years, a rate increase may be considered justified.
"Over the years, numerous businesses have set up in Jersey to take advantage of the local tax benefits. They may now be concerned about how GST will affect them. They need to be clear on the rules and organise their affairs accordingly. The administrative burden for relevant businesses will increase, which will mean further costs."
Businesses are only required to register for GST when their turnover exceeds £300,000, although voluntary registration is possible before then. The additional income from the tax is intended to make up for any shortfall when the island introduces a standard rate of corporate income tax of 0% and a special rate of 10% for specific industries, e.g. finance, next year.
For further information, contact:
Hannah Dobson is a VAT director at Smith & Williamson
Tel: 020 7131 8138
E-mail: hannah.dobson@smith.williamson.co.uk
PR enquiries:
Layisha Laypang, tel: 020 7131 4550
Kate Harrison, tel: 020 7131 4228
Disclaimer
By necessity this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Article correct at time of writing.
Note to editor
Smith & Williamson is a leading independent investment management and financial services group, with over 1,400 employees, that provides a broad range of services including investment management, financial advisory, tax, private banking and accountancy to private clients, professional practices, companies and non-profit organisations. The group operates from offices in London, Belfast, Bristol, Glasgow, Guildford, Maidstone, Salisbury, Southampton and Worcester.
Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International, a worldwide network of independent accounting firms.
