Home » VAT » LVCR drops to £15 but there are more changes to come….

LVCR drops to £15 but there are more changes to come….

Today LVCR dropped to £15 from £18 from all non-EU destinations into the UK. However this measure is not the end of the story, as some commentators have suggested. Firstly anyone in offshore mail order will know that whilst a drop to £15 is an inconvenience it still allows most products to enter the UK VAT free particularly if you add in a postage and packing charge.  Nobody really thinks that lowering LVCR is going to have a huge affect on the ongoing abuse of LVCR and in particular the industrial circular shipping operations currently utilising the Channel Islands.  Secondly the 2011 budget notes make it very clear that dropping LVCR to £15 is not the only measure that the UK intends to introduce  and that “the Government will also explore options with the European Commission to limit the scope of the relief so that it can no longer be exploited for a purpose for which it was not intended“.

A member of RAVAS recently complained to HMRC and received a letter which stated “ministers have considerable sympathy with the points you make. The Government’s view is that LVCR is currently being exploited…. and it adversely affects UK companies who find it hard to compete with companies who do not have to charge VAT…..the Government is determined to put a stop to this situation

It is now clear that both the EU and the UK are serious about ending LVCR abuse.

RAVAS believes that under the guidance of the European Commission further measures to prevent the abuse of LVCR have already been formulated  and that these will be announced imminently.  

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15 Responses to LVCR drops to £15 but there are more changes to come….

  1. I’m guessing that the only thing that will have changed today will be on the paperwork thats sent out with these orders where the postage and packing rate has gone up by £3!

  2. I was under the impression the value included the postage?

    I’ve noticed a lot of pre-order BLU RAY titles from Amazon have dropped from £17.99 to £14.99, no way was there is £3 plus margin at £17.99 so the studios have dropped the DP to allow the retailer to sell at £14.99.

    Some titles have gone up on TheHut and the like to £22ish but two studios cut their promos this quarter to what seems to be deliberately offering the opportunity to the CI based companies to sell at £14.99.

    The only real positive effect to to UK, VAT registered businesses would be for the lope-hole to be closed completely.

    • Unfortunately the cost of postage and packing can be added to the LVCR threshold but that’s abused as well. We agree. The UK should close it down completely.

      • Well let’s hope they do before more damage is done. It should be part of the OFT remit to detect and destroy ALL forms of market distortion and maintain fair competition.

  3. Further evidence that there is real abuse of LVCR.

    A GUERNSEY internet firm is planning to move to Switzerland while an imminent announcement is expected on the possible abolition of a VAT relief vital to the industry’s future in the island, it has been reported.

    The level of low value consignment relief – the amount below which goods can be exported into the UK VAT-free from jurisdictions outside the EU – reduced from £18 to £15 yesterday.

    The Daily Telegraph’s website yesterday carried a report that said: ‘Plans to completely abolish the loophole exploited by online retail companies operating out of the Channel Islands are believed to be imminent.’

    It then quotes an anonymous employee of a Guernsey-based internet company who was reportedly asked on Monday by his bosses if he would prefer to move to Switzerland or take redundancy.

    Reference: http://www.thisisguernsey.com/news/2011/11/02/local-internet-firm-‘is-looking-at-swiss-move’/

    • so in that case it would be nice to see the heading of this site change from: A resource for those interested in or affected by VAT free mail order from Jersey and Guernsey

      to:

      A resource for those interested in or affected by VAT free mail order from Jersey, Guernsey and Switzerland 😀

  4. its quite obvious isnt it, something that was £17.99 will now attract about £3.60 VAT, lowering that price to £14.99 so it doesnt attract VAT is only £3 so they are better off lowering and making that extra 60p 🙂

    • All the more reason to remove it completely then!

      • I understand this issue doesn’t just affect media but there generally isn’t a £3 margin selling media at £17.99, the retailers either have to get better pricing or put the price up to around £21.60.

        RE Switzerland, if it isn’t in the EU and the current drop to £15 has affected all imports outside the EU then hopefully any future change will be of the same merit?

    • Thanks for telling us. Handed to HMRC. Keeping it coming!

  5. I’m from Jersey and i hate the way my island has been used to exploit tax loopholes not only in the fulfilment industry but all forms of tax ‘avoidance’ schemes.
    Its really embarassing and i sincerely hope this loophole is closed the sooner the better.There is an estimated 1000 people working in the fulfilment industry in Jersey the majority of them East Europeans on minimum wage.Jersey is only a small island and all these people coming to stuff DVD’s into envelopes is putting a massive strain on our limited housing,healthcare and schools.
    I don’t like to see anyone lose their job but this industry just deprives the UK government of tax revenue,creates an uneven playing field for UK retailers and causes social problems in Jersey.

  6. Agreed David.

    The fulfillment industry in Jersey pays little Jersey tax and the mainly East Europeans who work in it, on minimum wage mostly, do not earn enough to pay tax.

    The main beneficiaries of this industry are the large UK retailers who use the offshore structures and the UK consumer who gets cheaper products. The losers are small/high street retailers, HM government and Jersey.

  7. I have to disagree. We run a warehouse from the CI and I personally pay £250K a year in tax alone. Our staff are all on a minimum wage of £10+ per hour.