UK to close e retailer Channel Island VAT loophole

Tue 8th Mar 2011

The Conservative Chancellor, George Osborne, is widely expected to close a long standing VAT loophole, which enables traders on the Channel Islands to import low-value goods into the UK VAT free.

Whilst a part Britain, the Channel Islands is not part of the EU and therefore not subject to VAT. Jersey implemented a Goods and Services Tax, GST, recently at 3% (set to rise to 5% in June 2011). This means local online retailers can sell to UK, or other European countries, without charging VAT provided the value of each despatch stays below a GBP 18 threshold. Over the past few years, many large traders, including Amazon, Asda and Tesco, have set up distribution operations in the Channel Islands to take advantage of this loophole. They have focused on the sales of CD’s, DVD’s and books.

The closure of this VAT loophole is expected to raise over GBP 130 million per annum for the UK.

Click for free British VAT info