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.