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Channel Island Retailers fiddle whilst VAT burns.

A report in the Telegraph today revealed how Channel Island online retailers are cheating the UK government out of millions of pounds of tax by just falsely declaring the value of an item so that it falls below the £18 LVCR threshold and increasing the postage cost to cover the difference.  Because postage doesn’t attract VAT on import by hiding an items value in the postage CI retailers can avoid even more VAT. The article also shows how HMRC’s lax controls  are being abused – particularly in relation to postage and packing allowances – and the fact that HMRC relies on the Channel Islands Authorities to police this trade.

Spokeperson for RAVAS Richard Allen is quoted in the article

“No amount of excuses from HMRC justifies missing this kind of scam”

“Firstly, I don’t accept that UK customs should have any difficulty detecting this kind of abuse particularly when the arrangements that support bulk mail imports into the UK were set up by the UK authorities in the first place. Expecting vested interests in the Channel Islands to police it is like asking the wolves to care for the sheep.”

“Secondly it’s not hard to spot when a package declares a bogus postage on the label at such an unbelievable level that it’s the equivalent of it being marked ‘contains illegal drugs’.

“Thirdly, all these items are supposedly recorded by the authorities so there is no excuse for not also recording postage and packing. If you list everything on a spread sheet a quick formula will bring up anything with an unacceptable level of postage and packing at no extra cost to HMRC thereby increasing VAT revenue. Mis-declaring even once is an offence. How do HMRC intend to catch people out three times a year when they audit only annually? This arrangement should be audited weekly.”

 

 

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8 Responses to Channel Island Retailers fiddle whilst VAT burns.

  1. Well there’s a surprise – CI retailers bending the rules to their advantage. Tax avoidance is why they’re based in the CI in the first place – it seems to be part of the culture.

    Surely it’s time this was sorted out – no more messing around the margins, just exclude all mail order from LVCR and be done with it.

  2. So let me get this straight, I purchase a £17.99 memory card from a online retailer based on the channel islands, I get free P&P as most of them kindly provide this – and when it comes neatly through my letterbox it says “Product free – P&P £17.99”

    What with Oil and Food prices on the rise, I never thought for a minute the post office and padded envelopes and gone up too, damn where have I been these last few years.

    What a hoot, how is that for flying in the face of the treasury – I agree with Daryl, if that’s the type of joker who runs a company on the channel islands then shut down LVCR as it’s being abused by criminals as well.

  3. MIchael K Jones

    It is a tax avoidance scam on an absolutely massive scale and the Government cronies let it go. You voted them in -make them do something as the long term, we all pay higher tax to cover the loss to the Treasury.

  4. At least the Channel Island retailers declare the value on the front. If you ever order something from Hong Kong it will simply be labeled novelty toy £1 or similar.

    Surely reducing the threshold will only encourage similar abuses here.

    • Not correct. We have seen abuses from the Channel Islands including inflated postage and deflated values of the goods. Your assumption that Hong Kong is full of crooks and The Channel Islands are not is rather naive.

  5. We wish it were true. In addition to the CI Postal Services allowing inflated postage and packing charges, Citipost are already bringing in items with no CN22 which are them stamped in the UK. It is up to the postal authority dealing with the items that are sent to ensure that the CN22 is correct.

  6. Paying VAT on imports is fair enough, what gets me is the £30 or so “administration fee” that Royal Mail charge for collecting it!!! We need an efficient way of collecting the VAT that costs pennies per transaction rather than several times the amount of the VAT itself!

    • There is no administration fee on any shipments with VAT due coming in from the Channel Islands. All VAT is pre-paid by the sender under a Memorandum of Understanding (MoU) with the UK Customs Authorities. This makes the whole argument that LVCR is an administrative relief’ in the case of the Channel Islands a complete joke, since there is no cost of collecting VAT on imports from the Channel Islands at all. Scrap LVCR and just make sure all VAT is pre-paid under the MoU scheme. Without the MoU Channel Island mail order couldn’t operate as no body would use it for the exact reason you outline…so its unlikely anyone in the Channel Islands would want the MoU removed even if LVCR didn’t exist.