FSB and FPB take on VAT loophole

Small business bodies aiming to abolish practice which discriminates against small retailers


Britain’s biggest small business bodies have launched a two-pronged attack on a major tax loophole, which allows big retailers to get out of paying VAT by importing goods cheaply from the Channel Islands.

Both the Forum of Private Business (FPB) and the Federation of Small Businesses (FSB) are waging war on low value consignment relief (LVCR), which wipes out VAT on imports from outside the EU valued at £18 or less.

Many large firms manipulate LVCR by sending goods to storage bases in Jersey and Guernsey – neither of which are EU members – before re-importing the items at a fraction of the price by mail order.

The FPB has called on the chancellor to stamp out this practice in Wednesday’s Budget, arguing that it discriminates against small high-street shops and online retailers who lack the resources to distribute goods from the Channel Islands.

Forum chief Phil Orford has called on  George Osborne to “end this non-competitive tax abuse” and use the additional tax revenue to support community investment tax relief.

Meanwhile the FSB has written an open letter to the European Commission, urging senior decision-makers in Brussels to put pressure on the UK government.

The letter laments that abuse of LVCR “has resulted in onshore firms being unable to compete with large retailers, who have been able to set up operations in the Channel Islands and avoid VAT on goods intended for consumption within the EU/UK

“The distortion of competition caused by the UK Authorities’ inaction has created a severe imbalance forcing those who have to pay VAT out of business as they are unable to compete with those companies able to avoid VAT offshore.”

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