WHAT IS THE PURPOSE OF THIS SITE ?
This site is run and supported by a collective of UK mainland based retailers (both traditional and online) who have decided to create RAVAS (Retailers Against VAT Avoidance Schemes) in reaction to the fact that the UK Government has failed to prevent the industrial exploitation of an EU import VAT relief called LVCR. By allowing retailers to send UK goods via The Channel Islands (or any other non EU location) to avoid VAT on re-import we believe that the UK has failed to uphold its obligation under EU law and to prevent what we believe is an abuse of this VAT relief and therefore the tax avoidance and major distortion of competition caused by such exploitation.
This site was set up to give a voice to the many UK retailers suffering silently from this taxation injustice and who have received no helpful information from The Treasury, HMRC or their MPs. Advice that we have been given from a leading QC highly experienced in EU/competition law, has clarified our view that the circular shipping of goods is an abuse of LVCR and that the UK’s application of LVCR and failure to prevent abuse, tax avoidance and distortion of competition places them in breach of EU law. The website is supported by online and high street UK retailers in the Cosmetics, Ink Cartridge, Memory Card, Fishing Tackle, Car Parts and CD and DVD mail order Industries. It also has the backing of a number of major UK Music Industry trade and professional bodies who are taking forward a complaint at the European Commission about the UK Governments failure to prevent the abuse of LVCR and the destructive market distortion that has resulted. Please take some time to read this site and if you have been affected by LVCR abuse please send us your details and any evidence you may have.
This website is not intended as an attack on The Channel Islands as we realise that the exploitation of LVCR takes place from other locations and in any case should be policed by the UK authorities. The reality is that the majority of the exploitation of LVCR takes place on the Channel Islands due to their convenient location within the UK market place (a fact that is widely promoted by companies offering fulfilment from the Islands for UK retail) and because the UK Government has done nothing to stop it. We also realise that some companies have complained to the UK Government about LVCR exploitation, to no avail, and have subsequently been forced offshore to compete.
If any major retailer is unwillingly offshore and would like to see an end to what we believe is an abuse of EU Law and the market distortion it causes, we’d love to hear from you.
This is not a political site about tax revenue. We seek only fairness and justice in the application of VAT and the upholding of existing EU law.
We moderate comments on this site. If you wish to support a contrary view please post comments on a pro LVCR exploitation website as they will not pass moderation on this site.
For reasons of commercial sensitivity the supporters and compilers of this site cannot be identified.
A BRIEF INTRODUCTION …
Online spending is a huge business in the UK with an estimated 8% of all retail sales currently being made over the Internet. The rapid growth of online shopping can be attributed to a number of factors, but most notably to convenience, breadth of choice and low pricing.
It is the focus on price which has resulted in a large number of retailers locating operations off-shore in the Channel Islands, outside of the EU. This has allowed them to take advantage of EU Administrative Relief known as Low Value Consignment Relief (LVCR) which allows goods entering the EU to be exempt from VAT if they are less than £18 (the amount is adjustable by individual member states of the EU but the UK has set it at the highest level of £18) . Essentially this means the retailers in the Channel Islands can export goods to the UK mainland without having to account for VAT. The goods are sold into the UK mainland VAT free.
Items such as DVDs, CDs, Printer Cartridges, Computer Peripherals, Camera Memory, Health Foods, Fragrances, Contact Lenses and many other low value, high volume goods, all typically fall under this £18 limit meaning that companies operating from the Channel Islands don’t have to charge VAT on these products. The result is that they can offer lower prices than their mainland based competitors or alternatively charge the same price and make more money. Often it’s a combination of the two.
While it may be simple to chalk this down to being good news for the consumer there are of course a number of losers. The companies still on the UK mainland, trying to run either a retail business or online shop find it difficult, sometimes impossible, to compete due to the unfair restrictions being imposed on them. Many companies work on margins of just a couple of percent and having a competitor given an immediate 17.5% advantage makes it simply impossible for them to compete. This advantage is set to increase to 20% when the VAT rise comes in to effect in January.
As mainland businesses find it either difficult to expand or worse, difficult to continue trading, invariably job losses result. It could be argued that these UK mainland companies should perhaps jump on the bandwagon and move offshore but the reality is that it is a very expensive process involving a great deal of investment which small companies cannot afford. Additionally when faced with the reality of making a local workforce redundant and employing people in a different country, most would agree that such action is ethically wrong if the aim is to benefit from a tax dodge. There are of course the companies that are unable to move as they rely on a local customer base but even the most competitive business on the mainland still struggles to compete with Tesco in Guernsey when the government is handing the latter a 17.5% head start.
The 2009 sales figures for internet retail published by ERA (The Entertainment Retailers Association) show that the lost VAT on mail order sales for DVDs and CDs is £165 Million. This figure excludes any other of the aforementioned industries including Computer and Camera Memory Suppliers, Fragrance Stores, Health Food Shop, Printer Cartridge Suppliers, Contact Lens Distributors and other resellers of low value products. The actual figure lost is unknown and at a time when we are faced with a massive fiscal deficit it could be considered madness to be losing this revenue stream, not to mention adding to our own unemployment queue by allowing the jobs to move abroad.
Everybody likes saving a couple of quid but the damage this offshore industry is causing to mainland businesses, jobs and revenue is increasing daily and is likely to continue increasing. In the meantime we watch idly as previously viable businesses go to the wall as they either resist the urge (or are unable) to dispense of their staff and leave the mainland.
It is unbelieveable that HMRC and the Treasury continue over 10 years to deny that the problem exists – it is like an extract from Yes Minister! Meanwhile the cost of this improper trade has grown to well over £100m pa in lost VAT and caused untold misery to and closure of small outlets who cannot compete against a 17.5% (soon to be 20%) price disadvantage. Incidentally, neither can the larger outlets which have been forced to join the circular trade abuse.
Everytime I read more about this abuse it makes me want to scream…viable, hard working UK based businesses are suffering because of our own government…it is such a ridiculous situation it is almost unbelieveable.
I thought I was suffering in silence until recently when I came across this website and others in different industries to mine. Thankfully through RAVAS we now have a voice.
I am in skincare and cosmetics and have suffered a signifcant loss in business to Channel Island based retailers being able to undercut my prices. It is only a matter of time before no one in the UK will be able to sell anything below £18 (the threshold where LVCR applies) as all the business will move offshore meaning a massive loss in VAT revenue, UK businesses failing and environmental issues due to all the freight being airlifted from The Channel Islands to the UK.
Well done for setting up a site to focus on collective action. If we all work together we can get this overturned and give mainland businesses a level playing field. We’re not asking for any advantage just fairness.
Surely we are missing the biggest culprit here in tax avoidance issue.
Whilst LCVR is perhaps an issue, it pales into insignificance when compared to all the millions of pounds flooding through the fingers of individuals trading on “backbedroom.com” Individuals operating on Internet auction sites. They cunningly source all manner of valuable high street branded products, ranging from luxury goods to car accessories. Then go on to shamelessly and repeatedly drain the value out of them grossly undercutting genuine businesses who are saddled with overheads.
The consequential damage is not only to the brands permanently, but in my opinion has contributed to the closing of thousands of traditional businesses in the last ten years. Far more revenue is surely lost than LCVR offshore could ever be responsible for.
John, I think the issue is that you are always going to have kids trading out of their bedrooms; they’re not bothered about making huge mark-ups as they don’t have huge overheads.
Of course, the majority of them don’t make Corporation Tax returns however in fairness the suppliers that they’re buying off will be charging them VAT which they won’t be able to claim back… Unlike Channel Island resellers.
Stopping this kind of tax avoidance by small individuals locked in their bedrooms is pretty much impossible. On the other hand we have massive companies like Tescos and Sainsburys blatantly taking tonnes of goods out to Jersey just to fly it straight back in to the country days later. This is clearly avoidance which should be easy to curb.
Jason,
You need to do your homework a little more, I live in Jersey and I dont believe we have Tescos or Sainsburys operating from Jersey, please enlighten me if we do?
Again, miss-information on this website that is allowed to be published for no other reason than to try and make Jersey and the Channel Islands look like that badboy! I really do think that if the information in the posts are not correct facts that they should not be published! Surely that it not really a fair playing field! 🙂
Jonny – OK how about Amazon (Indigo Starfish) and Play.com ? Big enough for you? They are in Jersey. By the way Amazon got refused a licence to trade but they work with another company to get round it!
Jonny,
Sorry, I meant Guernsey, not Jersey.
I stand by the rest of my comments though.
Question, who will collect the VAT ? Will this mean hiring more customs officers ? or will Royal Mail collect even after the 3500 layoffs? Also will this rule be put in for HK, Switzerland , USA etc, if not I guess everyone moves to Switzerland and bye bye to massive amounts of business for UK suppliers who sell the Jersey. Other European sellers will supply to Switzerland…just ask Tesco.
Shouldn’t Ravas focus on Apple who who is in Luxemburg selling Music and HD quality movies online?
Even if the LVCR is lowered to £8 many CD’s and DVD’s can still be sold under that…CD’s DVD’s old technology…no need to cry over spilt milk…Anyone could see the CD business change when Napster came…look at Skype..Luxemburg based…get real
Mark 2 re your Question, “who will collect the VAT ?” Answer The Jersey and Guernsey Post office. They can then write a cheque out to HM Government (we’ll accept bacs transfer) Thanks!
We don’t know which part of this site you don’t understand but we don’t just represent people who sell DVDs and CDs. As for ‘old technology’ have a look at this site and you’ll see that phonograph cylinders which became obsolete in 1926 are still made and sold online at http://www.phonographcylinders.com by what appears to be a perfectly sound business. As yet nobody is trying to corner the phonograph cylinder market by shipping them to Jersey and back in order to avoid VAT (a practice we believe was accurately described by Lord Lucas as ‘Smuggling’). We think you have missed the point somewhat. This isn’t about any particular product, technology or volumes of goods. Its about a distortion in competition. If you read the parts of this site that explain EU law you will see that it was never intended for the purpose that it is currently be used for, i.e. avoiding VAT and gaining an unfair competitive advantage in the UK. HMRC have confirmed that fact to us. As for the huge cost of collecting VAT from offshore, 80% plus of LVCR loss is due to the Channel Islands, and any VAT payable is collected through the MoU schemes which cost nothing to administer. Nobody will bother to circular ship stuff any more. It won’t be worth the effort.
Mark 2 seems a little jumpy. Does he have a vested interest in tax avoidance? Funny how people get sketchy with the facts when they feel cornered. Just for the record Mark 2 I’m not going to cry over your spilt milk. I hope a tanker load of it falls on your sorry head. Roll on budget day.
“Other European sellers will supply to Switzerland” We couldn’t care less about other European sellers. Its UK products looped offshore that’s the issue. Good luck selling non EU CDs and DVDs. Looks like Play.com had a problem. http://www.webuser.co.uk/news/top-stories/376249/play-com-settles-with-bpi
Ravas once again you focus on CD and DVD’s ..Apple has that market now and DVD’s..get with the times. That press release was from 2004 …Seven years ago…Good luck closing down Memory Cards, Gadgets etc etc. The customer in the end will pay more if this goes through. They will have your good efforts to thank for that. Keep an eye on the your watch…lets see if there will be any purpose to visit this one sided website after today.
We have other cards up our sleeves such as the as yet unresolved EU complaint which we believe is exerting pressure on the UK to comply with EU law. There’s also the question of circular shipping and the nonsense of a stamp being a value add. The fight doesn’t end today we can assure you.
“will this rule be put in for HK, Switzerland , USA etc” RAVAS has received a letter from the head of legal and policy at HMRC who has stated “the relief and the special VAT position of the Channel Islands were never intended to be exploited in this way to supply goods VAT free to UK consumers” . We think that’s pretty clear. Using a VAT relief for a purpose contrary to its intention is an abuse, whether it be from Jersey, Switzerland or Swaziland. We keep getting anonymous threats of libel through the site so if anyone wants to take action against anyone suggesting this practice is abusive we suggest they contact HMRC.
Can someone clarify for me exactly how the £18 (£15) threshold value is determined please?
Is it the retail selling price which determines whether VAT must be charged, or is it the cost price to the retailer which is used? HMRC seem to think it is the former, but I would like to know for sure.
Its the retail price (the price the customer is paying) excluding postage and packing. HMRC allow an amount on top for postage but of course this is abused and not properly policed (despite what HMRC claim).