On 13th February 2011 BBC News 24 covered the increasing pressure being put on the UK Government to end the so called offshore fulfilment industry and the exploitation of LVCR that is affecting thousands of mainland UK businesses.
Worth watching. The pressure is mounting.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I wonder if some of these suppliers actually only have a phone number/link to Guernsey but have the call centre and the stocks located in mainland UK? This is my feeling about one of them.
Yes, Demetrius, I have long suspected the same thing. I also suspect from my knowledge of my industry that some of these suppliers avoid vat on items above £18.00 by fraudulently accounting for them. For example an item which should be £35 + VAT would go through their books as 2 different items @ £17.50. I cannot prove it of course but that is the only way they could come up with the prices they quote on more expensive items. If Richard Allen is reading this; I was very surprised that the BBC report stated that goods are shipped from the UK and then posted back which is exactly what happens and then went on to say that the practice was perfectly legal. I was under the impression that the legislation specifically prohibited this merrygorounding.
Most of the big ones have UK operations selling stuff over £18 but no doubt this is open to abuse. Play.com is registered for VAT in UK so it can sell items of £18 or over from a UK location.
http://forums.moneysavingexpert.com/showthread.php?t=1655111
Demetrius:
I work opposite a major CD packer in Jersey, so I know there is a massive volume of stock actually making the carousel ride.
Play.com declared around £7.5 million in VAT paid on items over £18 in 2005. That same year their turnover was £280 million so the major part of the trade was at that point items below £18. I doubt its changed that much since.
@woolley The merry go rounding is tolerated by the UK Govt. to the degree that they let retailers sell items below £18 off shore and over £18 from the UK mainland. Its perverse. That’s why they are in breach of EU law.They have confirmed to me directly they are aware what’s going on. They claim they cannot challenge it, however not challenging it means a huge market distortion and a huge market distortion puts them even further of breach of EU law at its most basic level. This thing will kill itself. If it makes VAT pointless either the EU just acknowledges that fact or they act. Its being argued over now….
This distortion I am sure has contributed to the downfall of independent music retailers in the UK. Although everyone likes to blame the supermakets and downloads, independents still had a place offering rare, small releases and imports.
It is now an impossible hurdle to success when companies such as Play can retail a huge catalogue at 20% less than UK shops. I know of only one company (Rough Trade) who’s shops are still doing well – both of them!
Yet another example of tax avoidance causing actual real UK jobs to be lost. LVCR should have been abolished when web shopping took off!
@Richard Allen
Or at least PURPORTED to be items under £18. As I stated earlier, I am pretty certain that items over the threshold are misbooked as items below it.
They are. Its called value shifting. Postage as postage isn’t included in the LVCR threshold. So you can send an item for £25 and say it was £7.01 to post and that way you declare value as £17.99 and make your profit in the postage. Its supposed to be policed but I’m sure it isn’t as we’ve seen this going on.
Fewer VAT officers therefore fewer compliance visits.
@Alex S Yes…the entire prepaid VAT scheme in Jersey is policed by one person and checked once a year by HMRC. Its pathetic.
Sorry let me clarify. Round tripping is on paper legal but could be challenged by HMRC as an abuse of VAT using a case called Halifax. However the UK’s allowance of LVCR as a vehicle for avoidance and market distortion is not legal. That may sound a bit odd as avoidance isn’t on its own illegal. It’s the UK obligations in EU law relating to LVCR that are the issue here and the LVCR legislation obligates EU members states to disallow the relief if it is being used for avoidance and results in market distortion. This is the core of the existing EU complaint. It is the UK that is acting illegally by failing to stop this.
@Richard Allen
Yes, exactly that. And as I have said before all they have to do is reduce the lvcr limit to say £5.00 with exemptions for goods PRODUCED in the Islands and that would stop it overnight. The fact that this has not been done in almost 20 years that this has been a problem can only be down to corruption at a high level. I find it impossible to countenance the notion, even in the public service, that it could be down purely to stupidity or naivety. If it was a policy to help the Islands, well I don’t really see how it’s doing that either.
Stupidity, corruption …or both.