Constable VAT Consultancy LLP

HM Treasury and HMRC have announced today that Low Value Consignment Relief (LVCR) will no longer be available in relation to the importation of goods into the UK from the Channel Islands with effect from 1 April 2012.

Unless other VAT reliefs are available, VAT is normally levied when goods enter the UK from outside the European Union. Until 1 November 2011, LVCR removed the VAT charge on non-commercial imports of goods up to a value of £18. Following an announcement in the 2011 Budget this threshold reduced to £15. The same Budget announcement also stated that LVCR would be removed altogether if the government was unable to resolve the issue of tax avoidance caused by retailers who have moved their operations to Jersey and Guernsey to exploit LVCR. HM Treasury estimate that tax losses arising from this amount to £140 million per year and have also said that abuse of LVCR results in small and medium retailers based in the UK being unable to compete on a level playing field. 

Low Value Consignment Relief was originally beneficial to suppliers of cut flowers but in recent years has been increasingly used by online suppliers of DVDs, CDs and other low value items which would normally be subject to 20% VAT when sold in the UK.

LVCR will continue to be available for imports from non-EU countries other than the Channel Islands, although HMRC have said that they will consider further restrictions in the relief if retailers move their operations elsewhere.

If you would like any further information in relation to this change please ask your usual CVC contact.