Why HMV and Channel Islands’ resistance to scrapping tax relief is futile
16 February 2012
Salman Shaheen - ITR
As the Channel Islands prepare to fight the scrapping of the UK’s low value consignment relief (LVCR) in a judicial review next month, Simon Fox, CEO of music retail company, HMV, argues that it may cause companies like his to relocate to Switzerland. Both, however, are likely to be shouting at the wind.
LVCR allowed companies to export goods below £18 ($28) in value to the UK mainland without incurring a VAT liability.
When it was established in the 1980s, its original purpose was to reduce the costs associated with collecting very small revenues from the tax.
“Originally it was an administrative relief,” said Andrew Burman, senior director at Alvarez & Marsal Taxand UK. “There is a cost associated with collecting lots of small amounts of VAT and cost-benefit analysis showed that it was not worth collecting those small amounts.”
However companies such as Amazon set up mail-order operations in the Channel Islands, Jersey and Guernsey, to exploit the loophole, shipping CDs, DVDs and other low value items to the UK which are exempt...
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