Home » VAT » The Message is in the Detail. Osborne Declares the use of LVCR for VAT Free Mail Order an ‘Abuse’.

The Message is in the Detail. Osborne Declares the use of LVCR for VAT Free Mail Order an ‘Abuse’.

Whilst RAVAS is disappointed in the weak reduction of the LVCR threshold to £15 in November, the clear intention to tackle VAT avoidance through LVCR is welcome and in particular the clarification that LVCR is being  “exploited for a purpose it was not intended for” – terminology that is used to describe a tax abuse.

Whilst a reduction in the LVCR threshold to £15 will have little immediate effect, a BBC Jersey TV News Report reacted to the Budget yesterday with concerns that local business was going to lose the trading advantage that makes internet mail order from the Channel Islands viable. Politicians from Jersey seemed less sure over the right to use the relief and a commentator from  accountancy firm Price Waterhouse Coopers  described the use of the relief in terms of ‘abuse’.

The question for UK retailers is why should the Channel Islands retailers even be allowed this advantage in the first place ? The fact that the fulfilment industry will be unviable without a tax break in our view proves the unfairness of this arrangement. The logical place for fulfilment to take place for any Jersey or Guernsey based company would be the UK mainland where the customers are.

However the real significance of George Osborne’s statement is that it puts a shadow over the legality of the current practices and if further action is taken as promised, this industry may well be dead and buried within 12 months.

BBC Channel Islands:

RAVAS on Guernsey Radio:

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8 Responses to The Message is in the Detail. Osborne Declares the use of LVCR for VAT Free Mail Order an ‘Abuse’.

  1. This just about says it all. “Oh Please don’t close this down. My business can only survive on a tax advantage” What kind of a business is that! Open up a warehouse in the UK mate…where your customers are. Jeez.

  2. Isn’t this a plain admission that here is a clear distortion in the market, the very thing that EU VAT law prohibits?
    This relief was never intended to make Jersey businesses competetive, it was intended to stop Jersey’s fresh flowers wilting whilst passing through customs.

    • Exactly.

      To be honest I think the Government have actually been quite kind to the businesses that are based on LVCR exploits by essentially giving them quite a fair warning that they’re on to their exploits of this VAT loophole and to change their business ethics accordingly.

      • I agree. The same grace wasn’t shown to UK business that had to die in a corner neglected by the UK Authorities.

  3. Not a moment too soon. Numerous UK businesses have gone bankrupt over the last 5 years because of this, creating unemployment in the UK due to tax free competition from companies shipping from the channel islands. Not to mention the enviromental waste from shipping products from the UK, to the Channel Islands, then back to the UK to avoid VAT. An old argument beated about was it would create un-employment in the channel islands. Why doesn’t the government wake up and worry about its own people first! The UK government has shown more care and thought for the inhabitants and workers in the channel islands than it has for its own people. Not to mention the tax they are losing.

    • Exactly. Just one company I know in the UK laid off 350 staff because they couldn’t compete. The company I worked for laid off 10. Fopp and Music Zone must be at least 1000 staff. The job losses are easily in the thousands. Meanwhile companies like Play.com and thehut had growth rates of over 100% year on year, for years. In five years Play.com’s turnover grew by over 2000%. Sending 10 items in 10 individual jiffy bags that could have been sent in one parcel is an inexcusable waste of resources, added to the pointless round tripping to obtain the VAT advantage (I’m sure these companies would try and argue that’s not why they were based in the Channel Islands!). Its utterly outrageous that both the UK and Channel Islands Governments allowed this to grow and develop. They should hang their heads in shame.

  4. Philip

    It’s shocking to see you use the term ” It’s own people”

    I guess if it bankrupted many company’s in 5 years and created such massive unemployment it should be boom times for the Channel Islands. But creating only 1000 jobs in Jersey and Guernsey doesn’t seem like it has destroyed as many as you claim.

    You quick to point out waste, how about all the stuff you buy from China. Metal, plastic etc etc is shipped to China and then the Chinese manufacturer goods and ship them back to the UK and we buy them all.

    China is the one of the main reasons we have high unemployment. The UK stopped making things like it used to many years ago.

    I find this website very offensive and your comments “The UK government has shown more care and thought for the inhabitants and workers in the channel islands than it has for its own people”

    This is simply going to far.

    • How dare the UK protect its own! I thought the Channel Islands hated the mainland and wanted to be utterly independent ? Why is it that those from the CI always use an example of some other issue to justify this ? “But Billy took more than me sir…I wasn’t the only one” Doesn’t make it right does it! As for the idea that a huge trading advantage over 15 years didn’t destroy UK jobs….ludicrous. I know many who laid off staff. Way more than are employed in the Channel Islands and from what I understand many of them are Latvian or Portuguese labour. These companies have huge turnovers and its all automated.