Osborne urged to end islands VAT-holiday by small-biz group

Big boys cram their stuff through florists' loophole

fingers pointing at man

Chancellor George Osborne should end the right of companies to import low-value items VAT-free from the Channel Islands and do something to reduce petrol and diesel prices, says a small-biz body.

Ahead of Wednesday's Budget various runners and riders are jostling for attention. The Forum of Private Business said it was time to end the exemption for good.

The Lower Value Consignment Relief was meant to help out flower sellers but has been widely exploited by the likes of Amazon and Tesco - CDs and DVDs sourced from their warehouses in the Channel Islands need not pay VAT. Packages worth less than £18 can be sold VAT-free.

The Forum has written to Osborne calling for the £130m a year lost to the Treasury by these VAT rules should be reinvested into Community Investment Tax Relief (CITR), which encourages private investment into Community Development Finance Institutions (CDFIs).

This scheme currently enjoys tax relief and raises money for investment in social enterprises and small businesses. That relief ends in 2012.

Osborne is also expected to stop a planned increase in Air Passenger Duty. Osborne said in interviews at the weekend he wanted to help "the squeezed middle".

He might also stop planned rises on fuel duty or even introduce a longer-term scheme to control the cost of petrol and diesel.

There have been heavy hints that this could include a move to cut the tax on fuel as prices go up, and increase it when the price falls again. This sounds great, but potentially expensive and risky.

Treasury moves to bring together income tax and national insurance payments are likely to be a harder sell to taxpayers. ®

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