Major Tax Loophole to be Closed

The LVCR (Low Value Consignment Relief) tax avoidance loophole will finally be closed this year, putting an end to the multi-million pound Channel Islands industry and an unfathomably long run of exploitation by large online mail order companies, including Play.com, Amazon and HMV.

The LVCR was originally set up in 1984 as a VAT-free threshold on imports of commercial consignments of goods valued at under £18 from outside the EU, in the belief that the admin costs associated with collecting the VAT would be more than the actual VAT collected.

This allowed major companies to move offshore and altogether avoid VAT on low-value (up to £18) items like DVDs, CDs, printer cartridges, memory cards and contact lenses, making it close to impossible for small UK companies selling similar products to compete.

In recent years, LVCR has come under fire for the obvious unfair and damaging economic advantage it gives to retailers based in the Channel Islands, at the expense of local retailers. The UK government is also estimated to have lost around £200 million in VAT revenue annually as a result of these offshore retailers.

The problem was addressed by Chancellor George Osborne in his March Budget, with a promise to lower the threshold from £18 to £15 in November. Merely lowering the threshold was however deemed by many to be a highly insufficient measure and it is believed that the loophole will be closed for good by the end of the year. And while the new laws will no doubt benefit the small retailer, consumers might have to start paying more for items that have – for many years now – been available cheaply via the internet.

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  • Vic Mel

    Just what we need more increases in costs. Tackle piracy not cheaper prices for the public