UK Drops Controversial VAT Tax Loophole
The UK government has announced that they are closing a controversial loophole in the Value Added Tax (VAT) code that allowed mail order retailers on the Channel Islands to undercut independent retailers on everything from music to cosmetics.
According to the Guardian, retailers such as Play.com and The Hut Group took advantage of the loophole, which allowed them to sell goods under £18 from the islands of Jersey and Guernsey without being subjected to the VAT, putting retailers in the UK at a marked disadvantage.
The exception, known as the value consignment relief (LVCR), put retailers out of business and cost the U.K. more than £140m a year in lost tax receipts. Because of the exemption, goods were often shipped to the Channel Islands in order to be reshipped to customers.
"This round tripping mail order industry, whilst popular with consumers, has destroyed or damaged scores of viable job-creating businesses on the UK mainland," Richard Allen told the Guardian., Allen started campaigning against LCVR when his own online music business failed, due, he claims to VAT free competition.
The Value Added Tax is a form of consumption tax levied on the value added to an item or service. The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. - via CelebrityAccess