Channel Island VAT loophole to be tightened
August 18, 2009
A leaked Treasury letter suggests that companies taking advantage of a VAT loophole by distributing CDs and DVDs from the Channel Islands may become the focus of a government crackdown.
The Treasury estimates that VAT free sale of goods from the Channel Islands to the mainland rose last year to £620 million. This has cost the Treasury £110 million in lost taxes. Some estimate that these figures could actually be much higher.
Ministers have previously said that the exploitation by online retailers of VAT relief on goods sold to U.K. customers for less than eighteen pounds was not actually a loophole. However, this now seems to be under review.
The problem seems to be that companies are shipping goods from the U.K. mainland to the Channel Islands and then bringing them back again claiming that this qualifies them for the VAT-free transactions.
It will be HMV in particular who is paying close attention to how the situation develops. Four years ago they relocated the distribution centre for their online sales to the island of Guernsey. However, a spokesman for the company has said that the company is not too worried because they hold a substantial amount of stock on the island. The spokesman claimed that “it is not shipped there upon receipt of customer orders, so we do not ’round-trip’. All product is picked, packed and labeled in Guernsey.”
Thanks to www.guardian.co.uk for the above information, for more information on this article please visit their website.