Section 199: Relief from Vat on Low Value Goods: Restriction Relating to Channel Islands
Summary
1.Section 199 will remove Low Value Consignment Relief (LVCR) from mail order goods imported into the UK from the Channel Islands.
Details of the Section
2.Subsection (1) provides that Group 8 of Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984 (S.I. 1984/746) (articles sent for miscellaneous purposes) is amended.
3.Subsection (3) inserts two new Notes into Group 8 which together provide that LVCR will not apply to any goods sent from the Channel Islands under a distance selling arrangement.
4.Subsection (4) provides that the amendment of Schedule 2 by primary legislation does not prevent amendment of that Schedule in future by subordinate legislation.
5.Subsection (5) provides that the amendments have effect in relation to mail order goods imported on or after 1 April 2012.
Background Note
6.Article 23 of Council Directive 2009/132 provides for Member States to exempt from VAT goods of negligible value imported into the European Union. Member States may set the threshold for exemption at between €10 and €22 (between £9 and £20). The relief is implemented in the UK by Item 8 of Group 8 of Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984 (SI 1984/746). Recital 5 of Council Directive 2009/132 makes granting of the relief (at any level) subject to the condition that it is not liable to affect the conditions of competition on the market. Article 23 of the Directive also allows member states to exclude from the relief goods which have been imported by mail order.
7.In Budget 2011, the Chancellor of the Exchequer announced a reduction in the threshold for LVCR from £18 to £15 with effect from 1 November 2011. He also announced his intention to explore further measures to prevent exploitation of LVCR as it was never intended that LVCR should be used in this way.
8.Most LVCR trade is from the Channel Islands. The Government therefore concluded that the supply of mail order goods to UK customers from the Channel Islands was affecting the conditions of competition on the UK market. The Chancellor therefore announced on 9 November that LVCR would be withdrawn completely for all goods imported on or after 1 April from the Channel Islands.
