The UK government has announced that from April 1, 2012, Low Value Consignment
Relief (LVCR) will no longer apply to goods sent to the UK from the Channel Islands.
The LVCR scheme allows goods imported to the UK from non-EU territories to
be sold free from value-added tax (VAT) if they are priced at less than GBP18 (GBP15
from November 1). The scheme has encouraged many businesses to set up warehouses
in the Channel Islands from which they ship items such as CDs and DVDs to the
UK, and some argue that this has contributed to the demise of some traditional
'high street' retailers.
At Budget 2011, Chancellor George Osborne stated the government’s intention
to take action to end the "exploitation" of LVCR, which in recent
years has been used on an increasingly large scale to sell low value goods to
UK customers VAT-free. At the same time, the government took the initial step
of reducing the LVCR threshold to GBP15.
According to the government the relief costs the UK GBP140m each year in lost
VAT revenues.
Legislation to enact the change is to be published in draft on December 6,
2011, for inclusion in the Finance Bill 2012. LVCR will continue to apply with
the new GBP15 threshold to commercial supplies from other non-EU jurisdictions.
The government has no current plans for further changes to the threshold.
In addition, the change to LVCR will not affect the existing import reliefs
for gifts from outside the EU, including from the Channel Islands. This relief
applies to non-commercial consignments, such as gifts sent to family members
or friends.
Announcing the government's decision, David Gauke, Exchequer Secretary to the
Treasury, said: ”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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