Not surprisingly, because other jurisdictions outside the EU are exempt, Jersey and Guernsey are looking at the legal issue of the loss of LVCR. As the Telegraph reported a few days ago:
Jersey's economic development minister Senator Alan Maclean was reported to have said that the UK appeared to be "discriminating against the Channel Islands" for scrapping Low Value Consignment Relief in their territory but not in other non-EU jurisdictions. The Jersey government is currently seeking legal advice to as to whether the UK government has a case to answer. Jersey stands to lose more than six hundred jobs as the industry responsible for sending cheap internet mail order goods like CDs, DVDs and contact lenses to the UK loses its right to sell at VAT-exempt prices. Companies located in Switzerland, Cyprus and Hong Kong, however, are still believed to be reaping the benefits of the same VAT exemption, known as Low Value Consignment Relief (LVCR). (1)
Today's Jersey Evening Post reports that a legal challenge will now be forthcoming.
But what would happen if LVCR disappeared? Then all goods currently shipping would need to have VAT prepaid on them by fulfilment companies. This does happen if the item is greater than £18 anyway. The Jersey website tells us the following:
I am a Jersey trader. Can I ship goods by post to customers in the UK without delays on arrival? Special arrangements have been made for the collection of VAT that would be due on goods sent from Jersey to the UK by post. These arrangements have been agreed with UK Customs and Jersey Post and include:
- accounting for UK import VAT on commercial consignments (excluding alcohol, tobacco and tobacco products) with a value exceeding £18 but not exceeding £2,000, and all perfumes and toilet waters not exceeding £2,000, that would otherwise be chargeable on the goods on importation into the UK
- the import of commercial consignments (excluding goods liable to excise duty) with a value not exceeding £18 into the UK
- using agreed postal routes other than those through an office of exchange (a post office which is manned by UK Customs)
Traders wishing to be authorised to dispatch goods from Jersey to the UK under the scheme should in the first instance contact Customer Services at Jersey Post.
But who administers this? This comes, as the HM Revenue and Customs site tells us, from Jersey:(http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?
"3.4 Pre-payment of import VAT on goods purchased on the internet
For goods purchased on the internet UK Customs have special arrangements that allow some overseas traders to charge, collect and pay over to us the import VAT that would normally be chargeable at the time the goods are imported. These arrangements operate under Memoranda of Understanding signed with the overseas countries customs and postal authorities, and traders wanting to use this procedure must be authorised to do so by these authorities. Once authorised they are issued with a unique authorisation number, which should be shown on the customs declaration or packaging. Also they will include the statement 'Import VAT Pre-paid'. Where these arrangements are used you will not be charged import VAT or a Royal Mail handling fee when you receive your package."
This means that Jersey - it is not clear whether it is Jersey customs or Jersey Post - are acting as unpaid administrators for the UK customs authorities. They are collecting the VAT from the Jersey traders, putting a stamp to say "prepaid VAT" on the package, and this then goes through without waiting for the VAT to be paid at the other end, which in the case of perishable goods, would pretty well destroy the export industry. The Jersey collectors then pay the UK customs with the VAT, and presumably also send them supporting paperwork to confirm that.
What is not so clear is (a) who administers this scheme in Jersey? (b) how many people does it involve? (c) what cost is involved in running the scheme (in terms of salaries paid to staff in Jersey)? (d) Is this administrative cost recouped in any way - after all, Jersey would be acting as an unpaid tax collector for the UK customs otherwise?
To this can be added (e) how much extra cost would be incurred if even small items of under £18 were also included in the scheme, so that volume of parcels might increase?
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