The Government has today announced that from 1 April 2012, Low Value Consignment Relief (LVCR) will no longer apply to goods sent to the UK from the Channel Islands. This reform will bring increased fairness for UK businesses, benefit the UK economy and protect millions of pounds in tax revenue.
At Budget 2011, the Chancellor stated the Government’s intention to take action to end the exploitation of LVCR, which in recent years has been used on an increasingly large scale to sell low value goods to UK customers VAT-free. Most of this trade is from, or via, the Channel Islands.
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.
David Gauke, Exchequer Secretary to the Treasury, said:
These reforms will ensure that UK companies, especially small and medium sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands. We are also protecting a significant amount of tax revenue. By making these changes, we are striking the best possible balance between the costs of collecting small amounts of VAT and protecting the interests of UK taxpayers and businesses.
Legislation to enact the change will be published in draft on 6 December 2011, for inclusion in Finance Bill 2012.
Notes for editors
The costs of LVCR to the Exchequer have increased dramatically in recent years and are now around £140m annually.
Since Budget 2011, the Government has engaged with the European Commission to determine ways in which the operation of LVCR in the UK can be reformed.
LVCR will continue to apply with the new £15 threshold to commercial supplies from other non-EU jurisdictions. The Government has no current plans for further changes to the threshold.
The change to LVCR will not affect the existing import reliefs for gifts from outside the EU, including from the Channel Islands. This relief applies to non-commercial consignments, such as gifts sent to family members or friends.
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