FPB reaction following Budget announcement
The Forum of Private Business (FPB) said in a statment issued after the Budget 2011 announcement: “In particular, the organisation is concerned that simply lowering from £18 to £15 the threshold price of goods shipped via the Channel Islands on which no VAT is payable will not stop large companies exploiting Low Value Consignment Relief (LVCR).
“The Forum agrees with the pressure group Retailers Against VAT Abuse (RAVAS) that the real test is whether businesses that do not have offshore facilities can now compete on an equal basis with their counterparts on the Channel Islands. The answer for smaller retailers – including those selling CDs and DVDs which will still have to charge VAT – is clearly no.
“It is important that the Government’s plans to work with the European Commission to limit the scope of the relief so that it can no longer be exploited for a purpose other than what it was not intended for stops the LVCR trade once and for all.”
EY comments on VAT announcement
Chancellor encourages us to buy British -
Ernst & Young VAT partner, Audrey Fearing, comments on yesterday's VAT announcement:
“In a fillip to the beleaguered UK retail industry, the Chancellor has sought to encourage us to buy British by reducing the threshold relating to low value imports, in respect of goods purchased from suppliers located outside the EU.
“In recent times a large number of warehouse operations have sprung up in the Channel Islands, in order to take advantage of the relief - essentially goods with a value of £18 or less can be imported into the UK free of VAT. Many retailers in the UK have long cried foul, stating that the relief was anti competitive.
“In an attempt to reduce the level of perceived VAT avoidance the Chancellor announced today that, with effect from November 2011, the threshold for goods being imported into the UK would be reduced to £15.
“However the effectiveness of this measure remains to be seen, given that most CD's and DVD's are continuing to come down in price and many already sit below the revised threshold. It seems unlikely that this will result in a decline in the number of business supplying such items from locations outside of the EU."
Alvarez & Marsal Taxand joins the discussion
Richard Baxter, managing director, Alvarez & Marsal Taxand UK, said:
“The budget is bad news for retailers of CDs and DVDs based outside the EU, who up to now have enjoyed VAT relief on most of their stock. Those businesses now have another headache on top of the increasing trend for digital consumption of music and films.”
FPB lobbies for LVCR to be switched to community investment reli
The Forum for Private Business (FPB) continued its campaign against the Low Value Consignment Relief (LVCR) this week, quoting a Treasury estimate that it costs at least £130m per year in lost tax revenue.
A 2008 Guernsey “Code of Conduct” failed to limit the volume of goods being sold VAT-free into the UK, the FPB claimed, causing devastation to the UK’s high streets as large retailers exploited the VAT loophole.
Instead, it wants the Chancellor to plough additional tax revenue into Community Investment Tax Relief (CITR), which encourages private investment via Community Development Finance Institutions (CDFIs). It continued: “Since 2003, CITR has helped raise almost £70m in affordable credit for businesses and social enterprises. The scheme’s state aid exemption ends in 2012, meaning that, unless it is renewed, under EU laws limiting public financial support for the private sector, the tax relief available will be severely curtailed.”
Phil Orford, the Forum’s Chief Executive, said: “There have been indications that the 2011 Budget will finally tackle the widespread VAT avoidance carried out by large, Channel islands-based retailers, which devastates high street shops and smaller online retailers, but any measures must genuinely end this anti competitive tax abuse and not just create a smokescreen of the kind we saw with the Jersey license policy of 2005, and later Guernsey’s non-binding code of conduct.
“What better way to begin reversing the damage caused to our high streets by this long-standing practice than to use the additional tax revenue to support Community Investment Tax Relief and encourage investment in businesses and social enterprises in these same communities?”