High Court asked to keep 'cheap DVD' VAT loophole open
Judicial review begins this week
The English High Court will tomorrow begin an investigation to determine whether online retailers should be allowed to avoid paying VAT on CDs, DVDs and Blu-ray Discs.
The judicial review, demanded by the Governments of Jersey and Guernsey, follows Chancellor George Osborne's decision to close the Low Value Consignment Relief (LVCR) loophole on 1 April 2012.
LVCR allowed online retailers shipping low-cost goods from the Channel Islands to avoid VAT. For the past decade, that has allowed the likes of Amazon, Play, Sendit and others to slash the prices of discs.
Disc buyers love it, but small retailers and, crucially, the Treasury hate it. The UK government's finance arm estimates that the loophole, a gap in the tax legislation governing the importation into the EU of goods costing less than £15, costs the Exchequer £110m a year.
Since Jersey and Guernsey aren't part of the EU, retailers have been able to ship low-cost goods there then sell them on to UK punters at VAT-free prices. The government of both territories are keen to maintain LVCR. They say closing the loophole is discriminatory and illegal.
Others argue that LVCR is an anachronism, intended to cover perishable goods sent by post. They argue that the loophole now does nothing but benefit big companies who can afford to ship goods to the Channel Islands and have them shipped out again to the UK.
That, they say, harms small, local retailers across the UK.
The judicial review takes place at the High Court of Justice Queen’s Bench Division Administrative Court concludes on Thursday. It could force the government to maintain LVCR. ®
Peanuts - if they're that worried about lost tax, why not go after the likes of Vodafone for the missing £6bn?
It's about time this loophole was closed, not surprised the channel island tax dodgers are moaning.
Play.com might be setting themselves to avoid this. Their invoices have recently started listing 'service charges' built into the price of the goods.
Re: costs the Exchequer
"if they close this loophole, people aren't suddenly going to start buying the dvds at +VAT prices in the same volume that they do today."
Doubt it ... think most people ordering via Amazon etc are buying something they want to get - the fact that its coming from IndigoStarfish and saves £3 is probably not a major factor. In any case I'd expect that Amazon will be able to absorb some of the VAT related increase (no need to ship DVDs to Jersey then back to UK)
We've not necessarily asking them to keep LVCR, just if the want to close it, close it for all. Closing it just for the Channel Islands does not solve the supposed problem at all, it just moves it.
@ Destroy All Monsters
"this means State will hoover up £110m a year (best case, as said), which won't be in the private economy anymore"
You know the curve which demonstrates marginal propensity to consume domestically, you know, the one which basically says poor people spend all their dosh, and rich people save it?
Well the UK Gov is one of those paupers, I'm afraid! At the moment it's all-hands-to-the-pump, spewing bond-debt-financed cash into the economy!
The ridiculously distorting Jersey loophole undermines legitimate businesses in the UK which might otherwise hire people - among other undesirable effects - so I don't think your knee-jerk half-dimensional libertarian analysis really cuts it. If you're going to do the whole "tax is bad for the economy" thing, do it properly.