We see that questions are being raised about the legality of the UK blocking low value consignment relief (LVCR) only on goods entering the UK from the Channel Islands.
The point at issue here is one of fiscal neutrality – now a common area of challenge in VAT cases and one that was at the core of the recently released ECJ Rank case. Rank was successful in arguing that there must be a level playing field from a VAT perspective with respect to (in this case) gaming machines with similar functionality.
The argument from the Channel Islands is that the UK is not being fiscally neutral in making imports from the Channel Islands more costly than those from other non EU locations. For more on this please contact Julie Park on 01962 735350
LVCR applies when items valued at £15 or less are imported in a single shipment from outside the EU. The Channel Islands are treated as being outside the EU for VAT purposes and as a result a number of businesses selling CDs & DVDs online located distribution hubs there as a way of selling low value goods to the UK VAT free. The cost to the Government in the news release, has been put at around £140m annually. Many are of the view that, whilst this on the one hand levels the playing field for businesses in the UK operating in these areas by removing the advantages enjoyed by businesses already established in the Channel Islands before licences to trade were limited, it will likely mean that businesses will look elsewhere. The UK and Channel Islands could therefore lose businesses to overseas locations that are not caught by the change.
LCVR will continue to apply to goods coming from other countries outside the EU with a value of £15 or less and there are no plans for this to change. The question of course arises as to where the next nearest non-EU location is located – Switzerland, already popular due to its advantageous tax regime? Clearly the additional cost of postage needs to be considered and any increased delay in delivery time.
If you would like any further advice or assistance with this, then please contact Julie Park on 01962 735350.