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EU Commission Makes It’s Position Clear on LVCR Abuse

The European Commission, the body that polices EU law,  has made its position clear on the abuse of LVCR in the Channel Islands in a letter to RAVAS.

Referring to a recent meeting with UK Officials the Commission states that the UK Authorities “are aware of the problems that LVCR is creating and are firmly committed to putting an end to them” . The letter goes on to hint at the arrival of “further and more far reaching changes than those already implemented by the Budget Act”.

In the 2011 Budget George Osborne announced that LVCR would be reduced to £15 from all destinations into the UK but it is now clear that further restrictive measures are imminent. Whilst it is not certain what these will be, it is likely that a range of goods will be removed from LVCR altogether either by derogation from the relief entirely or under Article 22 of the LVCR directive   83/81 which allows member states to “exclude goods which have been imported on mail order from the exemption” . In theory this could be applied purely to The Channel Islands  in order to combat the ongoing abuse and to prevent LVCR being used for tax avoidance, but it could also be applied to any other offshore location from which LVCR abuse is taking place.

The Commission close their letter by reiterating that they will consider formal infringement procedures against the UK if the measures introduced by the UK Authorities are not sufficient to deal with the abuse of LVCR.

It is now clear that the LVCR offshore fulfilment industry is an abuse of EU law and one that will soon be history.  Millions of pounds in VAT currently lost to the UK taxpayer will now be saved and UK businesses struggling to compete with  VAT free mail order prices on the home market,  will at last be free to compete on a level playing field again.

RAVAS Spokesperson Richard Allen sums up the EU’s decision :

“ It’s very simple really. EU law states  that member states must ensure that LVCR is not used for tax avoidance. The UK has clearly failed to do that. The idea that LVCR was designed to provide companies with a means of selling goods, that were intended for consumption in the UK, VAT free in the UK  is and always has been, a myth “

 

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14 Responses to EU Commission Makes It’s Position Clear on LVCR Abuse

  1. RAVAS would like to thanks the retailers, academics, trade bodies, tax and law experts, politicians, ministers, Lords and yes even customers and consumers who have supported this campaign over the last few years. It’s not entirely over yet but the end is certainly in sight.

    This was always a very simple moral issue about fairness, right and wrong. It is wrong and unfair that anyone should gain a sale in any market place just by avoiding a tax.

    Fairness and right won.

  2. Yaaaayyyyy!!!!

  3. About time too. Shame so many have lost their jobs, we also have lost great indie shops,and to cap it all the industry in a complete pickle. Still at least it’s finally gonna happen.

  4. “Whilst it is not certain what these will be, it is likely that a range of goods will be removed from LVCR”

    I hope that it’s a very long list of goods, because if not, everything that’s not on the list will continue to be shipped from Jersey. Perhaps that’s the devil’s bargain the UK Gov will aim for – just remove the items that campaigners have made the most noise about?

    I don’t mean to be down on the sterling work that RAVAS has done, it has been a huge effort and it looks like it may pay off – but until the detail emerges, I’m inclined to be cynical about any pronouncements from politicians, either UK or EU.

    If the final shape of the changes to LVCR isn’t either a complete removal of the relief or a very short list of goods that WILL be allowed to continue to benefit from LVCR, then it’s too soon to call the battle won.

    • Agreed. Which is why we remain in contact with the Commission and why they are keeping the threat of infringement procedures open. In theory with the pre-paid arrangements in place everything could be excluded. One caveat, genuine non-EU goods will always be an issue with LVCR until it is scrapped altogether or altered to take into account internet retail. Its an out of date piece of legislation. You can take further comfort from the fact that the officials at the Commission are not politicians, although point taken. The fat lady is yet to sing on this one.

  5. It really should be a list of approved products, surely that would be easier to monitor.

    1. Flowers
    2. Mmmmmmmm?

    • Even Flowers is debatable as those are circular shipped as well.

    • The only powers available under EU law to member states to prevent abuse are to exclude certain goods from the relief. This can be done on an entire product basis or mail order goods can be excluded. Exactly how these provisions can be implemented are not detailed in the directive. I guess we’ll find out. RAVAS has however made its position clear :

      RAVAS will not be satisfied by any tokenistic half-measures and believes that the government will have fulfilled its obligations only when it is possible for onshore UK retailers to compete on a totally level fiscal playing field with retailers with offshore facilities.

  6. Unfortunately I suspect that this is a case of the EU saying what you want to hear. I would be surprised if they managed to actually do anything on a meaningfull timescale. Hence the vagueness of their statement.
    Good luck with your campaign and I hope it succeeds before the UK highstreet disappears – although of course it would then be an ideal location to build a supermarket.

    • Bob. Of course you are assuming that we don’t have direct regular contact with EU officials and letters confirming that action is being taken. But then we wouldn’t publish that here for confidentiality reasons.

  7. Have you been given any indication of timetable? Obviously it would be good to hear that action would be taken before the Christmas trading period, but I just don’t see the EU acting that quickly.

    • We are expecting action before the end of this year and we are expecting a list of mail order goods to be excluded from LVCR in relation to The Channel Islands.

  8. In fact I just read in 1 of your links that the Government may review the situation in their Budget 2012. So this loophole doesn’t sound like it will be closed anytime soon. Too late for more small retailers. About time HMRC woke up to the fact, they’re not just losing the VAT but putting tax paying business’ out of business and losing even more revenue.

    • If you read the budget notes the level of LVCR will only be reviewed in the budget in 2012 if the Government has found no way of excluding mail order goods by that point. We understand that is currently being looked at and since the LVCR Directive allows member states to exclude mail order goods we do not see why there should be a problem doing this. In any event if they fail to deal with abuse and avoidance the complaint at the EU is still active and we would expect the EU to take more punitive action against the UK for failing to prevent avoidance and abuse.