Delivering the budget on 23rd March, Chancellor George Osborne
said that from November 2011, Low Value Consignment Relief (LVCR)
will be reduced from £18 to £15. The move seeks to
prevent the abuse of a tax loophole that allows businesses
operating out of the Channel Islands to sell goods with a value
of less than £18 without VAT.
Derek Jarman, a director at Worcestershire-based Hayloft Plants,
welcomed the news but called on the government to lower the
threshold even further. “To use the LVCR and make the most
of the VAT savings you have to be a large company with a large
turnover, which Hayloft Plants isn’t.” He estimates that if
he were to relocate plant packing to the Channel Islands
“purely to save paying VAT on our customer sales”,
for the financial year to 31st October 2011 he would save
approximately £400,000 in gross VAT. Jarman has contacted
his local MP and received support to take up the issue.
On the opposite side of the fence is Graham Winn, a director at
Guernsey-based Flowercard. He argues that lowering the threshold
from £18 to £15 doesn’t address the real problem-after
all CDs and DVDs generally cost less than £15. He says that
lowering the threshold would only hurt local businesses operating
on the Channel Islands. Cutting LVCR to £15 will “harm
legitimate local companies”, says Winn. It won’t be the big
corporations and supermarkets that will be affected; it will be
local florists and other businesses who still have to pay taxes
in the Channel Islands, labour costs and freight. “In
addition,” he says, “we are led to believe the
chancellor is also looking to go to the EU to derogate against CD
and DVDs so they cannot be imported VAT-exempt at any
price.”
The change from £18 to £15 will affect Flowercard so
much that Winn says he is researching whether to move product
despatch on-shore. “There are two options,” he says,
“reduce the average price to £14.99 and cut 15 percent
from margins, or increase the price to £19.99 and move
despatch on-shore.”
The Hut Group, a company that fulfils CDs, DVDs and games among
other items from the Channel Islands, declined to comment.
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