Government ends Low Value Consignment Relief, hitting horticulture imports from Channel Islands

The Treasury has closed a VAT loophole which saw companies setting up in Guernsey and Jersey to take advantage of Low Value Consignment Relief (LVCR) to sell goods 20 per cent cheaper than their mainland competitors.

The EU ruled that the practice was abusive and instructed the UK government to take action.

LVCR allows companies to send goods below a certain value to the UK without having to pay sales tax. That value was lowered from £18 to £15 on 1 November, a decision made on 23 March. LVCR will end on 1 April 2012.

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.

"We are also protecting a significant amount of tax revenue. By making these changes, we are striking the best possible balance between the costs of collecting small amounts of VAT and protecting the interests of UK taxpayers and businesses."

LVCR was introduced in 1983 in the belief that the administration costs involved in collecting VAT on small items below the value of £18 would outweigh the VAT loss to the exchequer.