Osborne closes unpopular Channel Islands tax loophole

George Osborne has revealed the Channel Islands tax loophole will be closed on 1 April. Mainland retailers, on the internet and the high street, have long opposed so-called Low Value Consignment Relief (LVCR), which allows retailers with a Channel Islands base to avoid paying VAT on goods with a value of £15 or less.

They argue the tax relief has led to hundreds of businesses collapsing because it puts them at a competitive disadvantage. The Chancellor is leaving the LVCR's elimination until April to give Channel Island retailers time to adjust. The move comes after the recent reduction of the limit on VAT-free goods from £18 to £15. David Gauke, Exchequer Secretary to the Treasury, said: "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."

Ravas, a group of retailers that have campaigned against the loophole, welcomed the move. Richard Allen, a campaigner, said: "The removal of this major market distortion should be welcomed by all UK businesses that wish to trade online. The VAT loophole is not only contra to the basic principles of EU VAT law but is also contra to any sense of fair play and a 'moral market'. A scheme that abuses tax legislation in order to promote damaging and predatory competitive behaviour should never have been allowed to develop."