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.