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Channel Islands VAT loophole closed

A court has ruled that the VAT loophole exploited by internet retailers operating in Guernsey and Jersey will be closed.

The companies were taking advantage of Low Value Consignment (LVCR) for the sales of goods such as CDs, DVDs and contact lenses.

For many retailers, the ruling will come as a relief as they had repeatedly told the Treasury they were unable to compete with the VAT-free prices online.

The Channel Island governments were fighting Chancellor George Osborne’s decision to target greater funds through the abolition of LVCR, announced in last year’s Budget.

Ruth Corkin, Head of VAT Services at accountants and business advisers James Cowper said: “From 1 April thousands of items valued under £15 will carry VAT. Channel Islands based companies will have to pay sales tax and their prices are expected to rise.

“We expect local suppliers to in future become more attractive to consumers, generating a welcome boost in sales for many small shops and internet traders in the South East.

“Rumour has it that the big companies will move their operations to somewhere like Switzerland but before that the Channel Islands governments might appeal and test the decision in the European courts.”

The developments, while good news for mainland businesses, present a potential disaster for the local economy, which is dependent on big companies presence.

This was posted in Bdaily's Members' News section by Tom Keighley .