What is LVCR and why does it matter?

Guerney's beautiful shoreline isn't the only thing attracting big business to the island.

For years firms based in the Channel Islands have been able to significantly undercut their rivals on the mainland thanks to a VAT loophole.

The UK government wants to close this loophole from April 1st, and with a judicial decision on it expected later today, we wanted to lend you a few thoughts on it.

It's called Low Value Consignment Relief (LVCR) and is essentially a tax relief on cheaper goods.

 

What it has meant is that retailers based in Guernsey and Jersey have been able to ship products worth £15 or less – like CDs, DVDs and, of course, printer consumables – without having to pay any VAT.

It's all part of a government effort to save at least £100 million in lost sales tax and make it fairer for UK businesses.

Play.com was the first major company to take advantage of the tax relief back in 1998, transforming in the process the shape of UK ecommerce.

 

For consumers it made perfect sense: cheaper products bought over the internet. But for some time there has been growing concern from many retailers that the loophole is simply unfair, and is damaging business.

On the other hand, the governments of Jersey and Guernsey say closing the loophole would have a big impact on their economies and employment.

Last November the government reduced the LVCR threshold from £18 to £15 and from April 1st 2012, it wants it disbanded completely.

While LVCR is undoubtedly a hot topic, what most retailers are looking for is simply a level playing field.

 

We're looking for a level playing field in the online market.

"It's a very competitive market out there, and now, more than ever margins are tight," said Tom Coley, our general manager.

 

"A company shipping their products from the Channel Islands or anywhere else the LVCR applies can easily undercut us by up to 20 per cent simply because they don't have to charge VAT. This makes it very difficult for us to compete."

 

Getting the best deal for the consumer is what we're all about. We want to help you save money wherever possible – that's the ethos INKredible was built on and we work very hard to get the best deals for our customers.

 

"But when customers are coming to us saying they are going elsewhere because they've found the same product almost a quarter cheaper from a company based in the Channel Islands it's quite a slap in the face," Tom said.

 

"We're not asking for preferential treatment, just a level playing field."

 

What are your thoughts on all this? Let us know. And with a decision expected later today, we'll be keeping you posted.

 





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