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The Treasury has announced that low-value consignment relief will no longer apply to goods sent to the UK from the Channel Islands, with effect from 1 April 2012.
In the Budget earlier this year, the Chancellor, George Osborne, said he would take action to end the exploitation of the 'loophole', which has been used on an increasingly large scale to sell low-value goods to UK customers VAT-free.
Most of this trade is from, or via, the Channel Islands. Legislation to enact the change will be published in draft on 6 December 2011, for inclusion in Finance Bill 2012.
Initially, the threshold below which items are imported free of VAT was reduced from £18 to £15. The change came into effect on 1 November 2011 and will apply to goods from the Channel Islands until 1 April next year.
The relief will continue to apply with the new £15 threshold to commercial supplies from other non-EU jurisdictions. The changes will not affect the existing import reliefs for gifts from outside the EU, including from the Channel Islands.
‘The withdrawal of the VAT relief should remove distortion in completion but will of course result in consumers paying more for these items,’ said Stephen Kehoe of BDO LLP, who added the change was ‘bad news for the Channel Islands and the estimated 1,000 individuals who are employed to service orders from the UK’.
