United Kingdom
9 November 2011 - Withdrawal of VAT Low Value Consignment Relief for imports from Channel Islands
UK-based retailers have welcomed HMRC's announcement that VAT Low Value Consignment Relief (LVCR) is to be withdrawn for imports of goods from the Channel Islands with effect from 1 April 2012. Draft legislation to effect the change will be published on 6 December 2011.
The relief, which enables low value goods to be imported without being subjected to VAT, was reduced to a limit of £15 per item from the previous limit of £18 with effect from 1 April 2011.
It has been reported that Channel Islands-based retailers are seeking to challenge the proposed change on the grounds that it is discriminatory. However, Art 131 of the Principal EU VAT Directive, which allows Member States to implement exemptions (including LVCR), requires measures to be taken to prevent evasion, avoidance or abuse. In this case, the alleged abuse involves the export of goods such as CDs, DVDs, contact lenses and an increasing array of other goods to the Channel Islands simply to enable them to be imported into the UK free of VAT. The European Commission is reportedly in agreement with HMRC's proposal.
HMRC states that if there is evidence of a switch to other non-EU countries to exploit LVCR the Government would consider the case for additional action, although HMRC considers that this is unlikely, as other countries do not enjoy the same access to the UK postal service as the Channel Islands.