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Channel Island VAT Loophole To Close Within a Year

According to an article in the Daily Telegraph the EU has told the UK that the Channel Islands VAT Loophole is an abuse of EU law and that the UK is within its legal rights to act and abolish the “abusive and restrictive” trade specifically emanating from The Channel Islands.  It predicts action by the end of the year.

RAVAS has been party to legal advice since 2007 that made it clear that the UK could take action to stop LVCR being used for abusive practices which in this case involves fulfilment to UK customers from an offshore location purely to avoid VAT – an activity that makes no commercial sense other than for tax avoidance. LVCR is an import relief and was never intended as a method of avoiding the VAT that ordinarily would be due on sales made within the UK.

If the UK doesn’t have to refer the matter back to the EU and has been given the right to take action with the EU’s support, then we should see a rapid end to this trade.

We watch developments with interest.

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13 Responses to Channel Island VAT Loophole To Close Within a Year

  1. Fingers crossed this could be the end of this nonsense. Took long enough. I guess if they try the same scam from Switzerland they can just pull the plug on LVCR in the same way since surely if the UK controls LVCR they can do what they want ?

    • One of the excuses given by LVCR apologists is that if the Channel Islands arrangement is closed down it will move to Switzerland. That would still be an abuse and if the UK has the power to act as it sees fit to prevent this practice it wouldn’t be difficult excluding Switzerland too, either entirely or on a product by product basis if the same abuse began to develop. Anyone who runs a business will know that you cannot operate with uncertain customs arrangements. It would make more sense to operate in the UK where your customers are, pay VAT and try and compete like everyone else in the UK has to, with VAT as part of your price.

  2. Common sense at last. How long did it take the Treasury to wake up to the fact this arrangement was just bleeding the UK of jobs and money ? I hope this really does happen now…

  3. The UK has no option but to tackle this issue as it is obligated under the LVCR directive to “prevent evasion avoidance and abuse”. This site has highlighted the fact that to date (mainly under the Labour Government)no action has been taken to prevent any of these. We are pleased that the new coalition Government and the EU appear to be taking a tough line on this blatant abuse of EU law which has generated a stream of pathetic excuses and paper thin justifications from those involved.

  4. If the VAT exemption was to help vegetable or flower growers, then why wasn’t it drafted to specifically target perishable goods? Why VAT exempt upto £18 value and not the type of goods? Maybe it’s do with corruption, i.e. someone had a mega financial plan in mind? Can someone elaborate?

  5. Garry the answer is that it wasn’t intended to help vegetable growers. That’s a myth. LVCR is for any goods entering the EU that are under the threshold (set by the UK at its highest level of £18) It’s the circular shipping of UK goods to deliberately take advantage of this relief which is the problem…and yes you are right to raise the question “why has that not been stopped” when its clearly an abuse and clearly contra to EU law ? That was the subject of the RAVAS complaint to the EU which has been upheld and why we expect this abuse to end shortly as the UK brings in measures to stop circular shipping.

  6. I see Play.com sold for only 25m. I thought they would have been valued at much more than that.? Probably something to do with the Channel Islands loop hole closing?????

  7. I also saw the news about play.com and wondered the same. £25mill seems a snippet considering they apparently have 14 million registered users. I wonder if it’s a case of “take away the VAT loophole and they don’t have a business”.

  8. Looks like the tax loophole wont be the only thing closing. This website will have to follow suit. Thank god. SOUR GRAPES.

    • When this website is redundant rather than celebrating a victory we’ll be celebrating a level playing field and looking forward to all traders competing on equal terms so that all traders have a chance to be prosperous.

      • What about all the people that orginate from Jersey that have set up businesses in good faith, not to abuse the system but to take advantage of it as it just so happens that they live here?

        Whilst I agree that the Channel Islands should have put stronger measures in place to prevent large retailers moving over here and further strengthening their competitive advantage I feel aggreived for the smaller businesses here.

        As a result, a predicted 3,000 people will lose their jobs through the fulfilment industry which may sound like peanuts to all of you but it actually accounts for nearly 5% of the population here.

        Therefore, RAVAS, may I request that you act with a little more dignity and grace and keep your celebrations to yourself instead of openly laughing in the faces of those that will be jobless in the near future.

        • We will certainly not be celebrating the fact that Channel Islands residents have lost their jobs, if indeed that does happen. Anyone who contributes to this site who has lost their job in the UK due to this issue will be aware of the terrible impact that has on their personal circumstances. Nobody would wish that on anyone else. We feel strongly that those who propagated and allowed this trade are the politicians and the civil servants in both the UK and The Channel Islands. As usual ordinary people suffer and those in power are not held accountable. This site has only ever sought one thing and that is a level playing field and that is what we shall be celebrating if LVCR is removed.

  9. I am sick and tired of hearing the ‘Oh, but our 1700 workers will lose their jobs’ How many people have lost their homes, their livelihood in mainland UK due to this ridiculous unfair law ?

    I for one am glad its being canned, but will canning it resolve the problem ?

    Although I am angry, and have personally suffered due to not being able to compete against the tax dodgers in Channel Islands – I dont blame them, I would jump on it too myself if I had the chance – infact I tried to set up a company their and use fulfilment services, but I didnt go ahead in the end.

    Level playing field will come boys?? Or will it ?

    Its not time to crack open the Champers in my book. Far from it !

    Two reasons:

    Firstly, the Channel Islands crew are moving such big numbers – they will still have an advantage in terms of buying power. The channel has changed, used to be manufacturer, distributor, reseller end-user. Now its manufacturer to e-tailer in Ch Islands as they are doing the biz. It will be very difficult to break that channel which has developed over last few years.

    Secondly – and more importantly, all the big CI companies will do – is switch fulfilment to Switzerland and alike. Where they have the same loophole.

    My personal views – this will cause a hiccup, a blip, all that will happen in the long term is CDs and alike will be shipped from Switzerland and other areas. Or shipped from outside EU ‘as a gift’ to avoid taxes.

    Its not won – but we are getting there… But dont hold your breath