Why LVCR abuse may be unpoliceable
24 May 2012
Salman Shaheen - ITR
Despite the UK government’s decision to remove low value consignment relief (LVCR) on mail order products from the Channel Islands to prevent big offshore retailers exploiting a VAT loophole, the EU’s final importation rules may be making LVCR unpoliceable.
When LVCR was first introduced to free up intra-community trade in 1983, EU member states still had cumbersome customs borders and it made little sense to slap VAT on low-value samples being sent between jurisdictions. When the customs borders came down in 1992, LVCR was quickly forgotten, but with the advent of the internet and the mass expansion of mail order, the close proximity of the extra-EU Channel Islands provided the perfect loophole for large retailers selling to UK customers to avoid paying VAT.
Under pressure from the EU and domestic taxpayers struggling to compete with their offshore rivals, the loophole has now been closed, but as International Tax Review reported last month, Channel Island retailers are looking to ship goods into Germany and Belgium to claim LVCR there on products addressed to customers in the UK.
New evidence uncovered by International Tax Review suggests that the EU’s final importation...
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