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Smaller businesses welcome closure of Channel Islands VAT ‘loophole’

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The Forum of Private Business welcomed the government’s announcement that from 1 April 2012 Low Value Consignment Relief (LVCR) will no longer apply to goods sent to the UK from the Channel Islands.

Jane Bennett, the FPB’s Head of Campaigns, said: ‘The Forum has been campaigning on this issue for years and we've been calling for an end to this as part of our Get Britain Trading campaign, so it's excellent news.

‘Virtually all the main players in the online industry mail CDs and other similar items like Blu-ray discs from the Channel Islands to customers. This totally unfair loophole has allowed them to totally dominate the market and put thousands of small, independent traders out of business.’

Richard Allen, spokesman for Retailers Against VAT Avoidance Schemes, said the removal of ‘this major market distortion’ should be welcomed by all UK businesses that wish to trade online. ‘The VAT loophole is not only contra to the basic principles of EU VAT law but is also contra to any sense of fair play and a “moral market”.’

HM Treasury said the reform would bring increased fairness for UK businesses, benefit the UK economy and protect ‘millions of pounds’ in tax revenue. The government announced at Budget 2011 its intention to take action to end the exploitation of LVCR.

‘Most of this trade is from, or via, the Channel Islands,’ the Treasury said. ‘The government took the initial step of reducing the LVCR threshold, below which items are imported free of VAT, from £18 to £15. The new threshold came into effect on 1 November 2011 and will apply to goods from the Channel Islands until 1 April next year.’