UK Government closes offshore tax loophole

The UK Government says that it will close the VAT loophole that has enabled mail-order operations based in the Channel Islands to sell low-cost goods to customers back in the UK without paying the 20% sales tax. Independent retailers who can't afford an offshore base have campaigned on the issue for a number of years against the
"Low Value Consignment Relief". Many mail-order operations including most of the big mail-order CD and DVD sellers will no longer have a 20% advantage over their mainland competitors and it is expected that at least 1000 jobs will be lost on the Islands.

Osbourne to look at UK's CD and DVD VAT loophole

The UK Chancellor, George, Osborne has said that the UK government plans to take limited action over the Channel Islands VAT exemption that allows offshore mail-order websites to undercut mainland competitors by 20% on sales of less than £18 (E20). The Channel Islands are in the European customs zone but outside the EU, and UK retailers incuding Tesco, Sainsburys, Amazon, Play.com and HMV sell products like CDs and DVDs by mail-order without having to pay a sales tax. Osbourne has pledged to reduce the threshold for the tax relief from £18 to £15 (which will have little effect on the hammering indepdent musc retailers currently suffer!) and Osborne also said he would "explore options" with the European Commission for limiting the scope of the relief, saying that if that if these measures are not effective that the issue will be revisited in a year's time. See http://www.vatloophole.co.uk/