UPDATE: Channel Islands fail in legal challenge against Government closing cheap CD/DVD tax loophole
Update 19.03.12
A legal challenge against the scrapping of a tax loophole that allowed companies in the Channel Islands to sell DVDs and CDs VAT-free has failed.
After three days in the High Court last week, Jersey and Guernsey lost their case against the UK Treasury, in which they argued against ending Low Value Consignment Relief (LVCR) on certain items.
Both island governments said they were considering an appeal. But UK Government lawyers said ministers would "go ahead with the legislation as planned".
Published 09.11.11
Online retailers will no longer be able to sell cheap CDs, DVDs, Blu-rays and games from the Channel Islands from April 1st next year.
The Treasury is closing a tax loophole which currently allows retailers to avoid paying VAT on goods under £15 sold from the Channel Islands.
The so-called Low Value Consignment Relief (LVCR) was widely used by companies selling CDs and DVDs online such as Amazon, Tesco and Play.com.
According to the Government, the tax loophole is costing the Treasury £140m a year.
On November 1st the maximum price of goods allowed under LVCR was cut from £18 to £15. From next April, the tax relief will be abolished completely, allowing high street retailers to compete more fairly in the home entertainment market, the Government argues.
"These reforms will ensure that UK companies, especially small and medium-sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands," says David Gauke, Exchequer Secretary to the Treasury.
The Government says that LVCR will continue to apply to goods coming from other countries outside the EU.
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Comments
£140 million? How does that compare against the amount of taxes avoided by businesses and the wealthy?
Hi get carter
Im totally with you thinking I just hope more people think like this so this country will get a better economy, I worked 5 year in tv retail and I know how people trying so hard to get a bargain but they never think much about the customer service you do get in store instead of online retail I do like bargain myself but I always done my best to buy my goods to a local store if people keep buying online so no more store will be available on the high street, the town I leave the shopping center closed already around 10 store since the January 2012 , if people think in store you need more than 1 or two people to run the business against Internet so more job for people to work in high street come bristish people support your local shop.
Just glanced at a BBC article with this well made point:
"Bluntly, to me, fair competition does not mean just ring-fencing the Channel Islands," [Deputy Carla McNulty-Bauer] said.
(Deputy in this sense basically means MP)
This is unlikely to help physical shops compete with mail order as many cost differences will still be in place.
What it will do is allow other non-EU countries to offer the same type of deal, which won't really help the UK much.
Given the relatively small (in UK GDP terms) amount this raises this is more political than practical, and sadly will have an effect on consumers - even if those companies do just relocate to the Swiss hills (http://www.bbc.co.uk/news/world-europe-guernsey-15718684) due to higher costs.
I feel a bit sorry for the staff in the islands who will be affected by this, when it's one country's political machinations affecting another's jobs.
And the flower sellers - it was for them this exemption was created. Loophole is a strong word bandied about by UK sellers though - it's a loophole only in the sense that a lower rate of income tax is a loophole - both very knowingly created and neither are accidents of legislation.
i support this decision to stop the tax loophole as the goverment is in dire straits at the moment and needs as much money as possible. shortly we will have to bail out italy at aoround 100 million. next we have more people coming over from poland and all the other countries which we have to let in and give them unemployment benefit after being on holiday for a month in this country for a month. i think we should stay in the eu send over as much money as possible raise our vat even more, as long as people in europe are ok then im happy. after the tax payer bailed out the uk banks im really glad they now charge me more interest as i am happy for them to make as much money as possible and give there bosses big bonuses. i just want to know who is going to bail out my credit card
EDITED BY MODS for inappropriate language
erm .........hmv's online division is based in Jersey aso that argument goes out the window
I didn't know about the duty cut to £15 but for optical media it's not going to matter for stuff that's not brand new. Play.com have been taken over by a Japanese company anyway, since then I try to look for the best price among UK firms like Zavvi/other TheHut Group companies and HMV.
Like Diamond Joe says, this Xmas and New Year sale season will be massive if people rush to complete collections before April 1st.
Expecting to get stuff on the High Street for the same price as the internet is just plain unreasonable.
Internet retailers use a warehouse on an industrial estate, with much lower overheads for everything ie rent/rates/general fitting out etc, where the High Street overheads are substantially more for all elements.
Why does everyone expect everything so cheap? Too many things are far to cheap nowadays, Electrical goods being a prime example, TV's are cheaper now than they have ever been, you can pick up a Branded 42" flat screen for under £300 in the High Street if you look around, yet back in the time when we had good old fashioned CRT TV, and you would be lucky to find a Branded 32" telly for much less than £1,000, with inflation etc, it just makes no sense. It's no wonder Best Buy are closing and Comet are down on their knees.
I like a bargain as much as the next person, but I also realise there does have to be some profit in it, not just for the short term, but the long term as well, so companies can re-invest and grow.
@tookie : there is of course a significant difference between tax evasion (illegal) and tax avoidance (legal). Of course we would all agree that the former is wrong and heavy financial and penal sanctions are required. However genuine tax avoidance is perfectly accpetable and what is wrong with organising your affairs to reduce the tax burden?! For those on modest incomes there is very little that can be done to reduce the tax burden, because we usually have a salary, perhaps the odd dividend and perhaps a bit of bank interest (ignoring low interest rates of course). But when you open an ISA that is tax avoidance, because you're not paying tax on the interest you would otherwise. If you make a pension contribution, the government gives an extra 20% if you're a basic rate taxpayer - all tax avoidance.
There are of course very aggressive tax schemes and the government have introduced a scheme where promoters of these have to give full details within 30 days so Revenue/Government know what is being sold. In every finance bill yet more legislation comes out to counteract them. These are "targeted anti-avoidance rules" (TAAR). In my experience they affect more than just the aggressive schemes though
You might also be interested to know that the government is considering a "general anti-avoidance rule" (GAAR). The difficulty with this is that it has to be immensely cleverly worded so that it does not prevent UK Inc from being a place businesess and individuals want to work in.
It's not as simple as saying as the government are impotent
I just bought a bluray online from HMV at £12.99, in store it was £19.99!! If you add 20% to £12.99 thats £15.59; still over £4 cheaper online. Perhaps they'll setup distribution centres in Switzerland, Norway, Iceland, or any of the other 19 european non-eu countries.
There's always a loophole.
I have mixed feelings about this. I'll be annoyed to have to pay extra for my blu rays, but on the other hand, unless we try to level the playing field, high street stores will be a thing of the past.
I also agree with tookie about the rich avoiding tax, but the labour government did nothing about this, so it's highly unlikely a conservative one will.
As for the channel islands economy, I once shared a house with someone from Jersey, and if he, his friends and girlfriend are typical of people from Jersey, I'd be quite happy if Jersey was wiped off the map, let alone have it's economy damaged.
blackrocket2000,
You must get better pages up on your browser from Play than I do. I can't remember the last time Play got my competitive pound sterling.
Once again, the poor wage earner and those on fixed incomes has to cough up more VAT on goods whilst looking for bargains; whilst the money grabbing spongers in the City use every loophole in the book to avoid paying Tax.
I have been buying online for years, but in fairness, I do not think the extra tax will make much difference in the price since CDs and DVDs are in real terms, cheap enough anyway.
Being a not so well off person,i like to make my money go futher or find a bargin.Why is it that this loophole can be closed up,but the powers to be are impotent at closing up the tax loopholes of the tax avoiding rich.
This is all a con. I really think you'll all got the wrong end of this stick.
Amazon have been swindling the public for years. Buy a DVD from Amazon in the UK and you pay.. 10 quid.. buy the same DVD from their 'preferred supplier Indigo Starfish' in Jersey and you still pay 10 quid. They charge the same price. So who profits the VAT.. AMAZON!!!!!
Yes, Diamond Joe you echo my thoughts. We could see a mini boom in the economy in the next 4 months! However the big players like Play.com will hardly notice the difference. Their prices are so competitive an extra 20% won't make much diiference. It may even encourage the big players to have a price war between themselves, to maintain market share.
Long overdue. Not fair that UK record stores that employ UK people that pay UK tax can't compete on price against amazon that can sell cheaper largely because they don't charge VAT.
Incidentally Amazon is structured so that it pays virtually no corporation tax to the UK unlike for example HMV, the UK's only remaining sizable record store chain, which will most likely go bust without this move putting a lot of UK people out of work.
I seem to recall paying between £13 and £15 for a new release CD in some stores in Northern Ireland. Assuming amazon get hit with 20% VAT on an 8.99 disc that's pushed the price to £10.60 odd. Still seems cheaper than buying from the high street.
Can always buy EDITED from tesco's chart wall at £8.99 but then I'd have to plunge screwdivers into my ear drums for relief.
While I agree that it should be a level playing field, it all seems a bit late in the day. We will all be buying downloads before long and they can be sold from anywhere. So the companies will be Monaco based and selling then tax-free under EU legislation.
Gonna have a bad impact on the Channel Islands economies. I can see the big players moving out.
Robert Ramsay +1!
I thought they were announcing plans to promote growth in a stagnant market, seems more like they are implementing plans to stagnate it further. It seems like everything this government announces it's going to do for good reasons is like "opposite world" speak. Next week there will be an announcement that there will be no third runway at Heathrow but they are considering an additional multi-functional access road that planes may be allowed to land on.
Hmm, looks like my postman's going to be rather busy between now and the end of March!
Another bit of blood from the stone.
ah, isnt it strange that anywhere the general public can save a few pence is a 'loophole' that needs to be closed? Will they also blame this on the 'previous administration'?