South East shops and internet traders set to benefit from closure of Channel Islands VAT loophole
Targeting greater funds from mail order sales of goods such as CDs, DVDs, and contact lenses, the Treasury has closed a VAT loophole which saw companies in Guernsey and Jersey taking advantage of Low Value Consignment Relief (LVCR).
Ruth Corkin, VAT Manager at accountants and business advisers James Cowper explained: “LVCR currently makes it possible for Channel Islands based companies to sell goods valued under £15 without carrying VAT. From April these companies will have to pay sales tax and their prices are expected to rise.”
Hundreds of mainland businesses have been forced to close since the late 1990s when companies first started to exploit LVCR.
Ruth added: “Many small, hard-pressed shops and internet traders in the South East will, from next year, once again be able to compete on a level playing field with the larger companies that have resources to set up operations in the Channel Islands. We expect this to mean that more people will in future choose a local service and the personal touch that brings, which will be welcome. However, there is still some doubt as to whether the UK Government can abolish the LVCR which is a relief available across the EU under EU law and the UK may yet be forced to back down.”
LVCR was introduced in 1983 with the intention of reducing the cost of collecting trivial amounts of the tax upon importation into the EU.
Ruth Corkin, VAT Manager, James Cowper LLP, Tel +44 (0)1865 200500 or email rcorkin@jamescowper.co.uk
11.11.11