Channel Islands tax advantage to be removed - 01-12-2011

Channel Islands tax advantage to be removed

HM Treasury has announced changes to the low value consignment relief (LVCR) rules that allow retailers based outside the EU to send goods to the UK VAT free. In order to tackle the growing trend of retailers sending large volumes of low value goods from the Channel Islands the use of the LVCR will be cancelled for goods sent by retailers from the Channel Islands. The new rules will apply from 1 April 2012 and will affect the many businesses that send goods to the UK from Jersey and Guernsey. Legislation to enact the change will be published in draft on 6 December 2011, for inclusion in Finance Bill 2012.

The LVCR is the threshold below which goods imported from outside the EU are VAT-free. The threshold was reduced to £15 from 1 November 2011 as part of the Government’s plans to tackle the VAT loophole used to import low value items, such DVDs and CDs, into the UK. The LVCR will continue to apply with the new £15 threshold to supplies from other non-EU jurisdictions. The Government has no current plans for further changes to the threshold.

There are different import reliefs that apply to gifts sent from outside the EU, including from the Channel Islands. These reliefs are not affected by this change.

The Exchequer Secretary to the Treasury commented at the announcement of this change that:

'These reforms will ensure that UK companies, especially small and medium sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands. We are also protecting a significant amount of tax revenue. By making these changes, we are striking the best possible balance between the costs of collecting small amounts of VAT and protecting the interests of UK taxpayers and businesses.'

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