Gordon Brown will come under fire in Parliament this afternoon for failing to rectify a VAT loophole that gives large companies a competitive advantage and has cost the treasury £80m in tax revenue, according to the Forum of Private Business (FPB).
Some 56 MPs have signed an Early Day Motion to close the Low Value Consignment Relief (LVCR) loophole, which removes VAT from individual goods for companies based outside the EU. The clause has enabled large retailers to import goods with a value of less than £18 into the UK without being charged VAT, thereby undercutting smaller counterparts at the point of sale.
Financial Secretary to the Treasury John Healey said in February that the £80m figure may rise to £200m in two years. An estimated £40m of the total loss of tax revenue is attributable to imports from Jersey, with numerous large businesses setting up a Channel Islands’ base, including Tesco, Amazon, HMV and Asda.
“Since the Chancellor paid this issue lip-service in his Budget speech, there has been little action to help small independent retailers who are being pushed to the wall by companies exploiting the loophole. Meanwhile, big retailers are making record profits at their expense,” said Victoria Carson, campaigns manager at the FPB.
Carson cited CDs and DVDs as a case in point, as these goods are frequently being manufactured in the UK, exported to the Channel Islands, sold online and exported back to the mainland without VAT, offering a competitive advantage that high street and online retailers can’t compete with.
In Parliament today Brown will be confronted with a proposal, backed by the FPB, to close the loophole by revising the threshold for LVCR, so that it is only applicable to goods priced below £7.
© Crimson Business Ltd. 2006
