Closing the loophole that allows VAT-free DVDs

[scottish]

http://www.bbc.co.uk/news/business-15646470

The government is to change the tax rules that have allowed retailers to avoid paying VAT by sending goods from the Channel Islands.

Low Value Consignment Relief (LVCR) will not apply to goods sent from the Channel Islands to the UK from 1 April.

The loophole has been used increasingly in recent years by companies selling CDs and DVDs online, such as Play.com, Tesco and Amazon.

The government said the loophole was now costing £140m a year.

The chief minister of Guernsey, Deputy Lyndon Trott, said the change would have a "significant impact" on the islands.

The maximum price of the goods allowed under LVCR was cut from £18 to £15 on 1 November following an announcement in the Budget in March.

"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," said David Gauke, Exchequer Secretary to the Treasury.

LVCR was originally established as a VAT exemption for goods coming from outside the EU. The idea was to prevent EU members having to collect small amounts of VAT, when collecting it would cost more than it was worth.

'Moral market'

The problem has been that as the Channel Islands are outside the EU, big retailers have been sending low-price goods to the Channel Islands and then having them sent back individually to customers in the UK.

The government said that LVCR will continue to apply to goods coming from other countries outside the EU.

"The removal of this major market distortion should be welcomed by all UK businesses that wish to trade online," said Richard Allen, spokesperson for Retailers Against VAT Avoidance, a group that has campaigned against LVCR.

"The VAT Loophole is not only contra to the basic principles of EU VAT law but is also contrary to any sense of fair play and a 'moral market'."

Jersey's Economic Development Minister, Senator Alan Maclean, said more than 1,700 people were employed in the fulfilment industry across the Channel Islands.

Channel Island legislators are worried about the amount of notice they have been given of the closing of the loophole.

[-:Undertaker:-]

Greedy government again, only adding to the hurts of the economy even more.

I wouldn't be suprised if its part of a Brussels order, seeing as the only reason we have VAT is because of the EU.

[Ajthedragon]

Greedy government again, only adding to the hurts of the economy even more.

I wouldn't be suprised if its part of a Brussels order, seeing as the only reason we have VAT is because of the EU.

...then why raise it?

We have VAT to increase tax revenue last time I checked.

Personally I don't see the problem, I very much doubt I'll stop buying DVD's because I'll have to pay £1 or £2 more.

[Jordy]

Never knew about this tax loophole but it always puzzled me that every DVD I've ever bought from Amazon, Play.com and most major sellers on eBay come from the Channel Islands, it's not exactly the cheapest place for a distribution centre is it? Well now it would appear it was.

Not exactly great news, basically I'll be paying slightly more for DVDs now and the additional money will go to the government.

[Oleh]

So now instead of paying a reasonable price. It'll be unreasonable.. Good job there's carboots.

[-:Undertaker:-]

...then why raise it?

We have VAT to increase tax revenue last time I checked.

Personally I don't see the problem, I very much doubt I'll stop buying DVD's because I'll have to pay £1 or £2 more.

VAT was introduced because we had to introduce to comply with the European Union.

As I also understand it, whenever our government wants to raise/lower VAT it must request approval from the EU Commission.

Another one of those issues which gives no hint of coming from the EU, but does.

[Ajthedragon]

VAT was introduced because we had to introduce to comply with the European Union.

As I also understand it, whenever our government wants to raise/lower VAT it must request approval from the EU Commission.

Another one of those issues which gives no hint of coming from the EU, but does.

Yes, but without it we wouldn't be gaining enough tax revenue.

I couldn't care less whether it's under EU law or not.

[The Don]

Ridiculous, We can afford to bail out other countries yet we're nitpicking at the price of DVDs to garner a small revenue (compared to the amount of funding the government receives)

Ridiculous.

[-:Undertaker:-]

Yes, but without it we wouldn't be gaining enough tax revenue.

We managed beforehand, maybe we ought to stop spending so much on foreign aid, the EU, foreign wars etc and then we'd be able to cut tax?

I couldn't care less whether it's under EU law or not.

Of course you couldn't care what the EU does, that why you support and vote for the useless Conservative Party. I do on the other hand care that an unelected foreign government can create/enforce taxation without a democratic mandate - no taxation without representation, yeah?