Pressure group RAVAS is taking its fight against low-value consignment relief (LVCR) abuse to the European Commission (EC) in light of evidence that the practice has been displaced from the Channel Islands to other non-EU territories.
Hundreds of UK-based resellers of low-value IT kit were set to benefit after the Channel Islands lost their judicial review against ending LVCR on 1 April.
HMRC estimated the loophole, which allowed retailers to export sub-£15 goods to the Channel Islands only to re-import them to UK customers VAT-free, was costing it £130m a year.
However, it appears fears that the ruling would simply prompt Jersey and Guernsey players to set up fulfilment operations in other non-EU territories have been realised.
RAVAS [Retailers Against VAT Abuse Schemes] last month wrote a letter to chancellor George Osborne, HMRC and the Treasury highlighting how LVCR abuse is now taking place via both Switzerland and the US.
Talking to ChannelWeb, RAVAS representative Richard Allen said the body would press for an EU-wide clampdown by lobbying the EC.
"The abuse has been displaced," he said. "It has become more devious and secretive, and is not as mainstream as it was, but it is still going on."
Some Channel Islands-based firms immediately moved back to Blighty after the British Crown Dependency lost its appeal in March.
But others are now exporting goods into bonded warehouses in the US and Switzerland before mailing them in bulk to Germany and Switzerland where they are cleared for LVCR, said Allen. The goods are then posted to multiple EU member states, including the UK.
"We want to see the EC get its act together on this as quickly as possible," Allen said.
Mainland UK-based traders of low-value IT kit such as printer cartridges and memory sticks who were counting on the ruling to put them on an even footing with offshore competitors have had their hopes dashed.
Kevin Bordley, whose firm www.creativeupgrades.co.uk sells memory cards, grumbled: "There was a peak in sales just after the ruling but things are now back to where they were. Initially, their prices met ours but they have now gone below ours again."
Chris Holgate of printer cartridge e-tailer Refresh eCommerce, said: "We always knew there was a possibility they would move to other jurisdictions but the lengths to which our competitors are prepared to go to avoid paying tax is shocking."
In a statement to ChannelWeb, a Treasury representative said: "The government is committed to ending exploitation of LVCR regardless of location. Working closely with Royal Mail and the UK Border Agency, HMRC is monitoring the impact of this change and any evidence that diversion to other non-EU jurisdictions is taking place.
"If evidence emerges that diversion to other jurisdictions is taking place on a significant scale, we will take additional action where necessary."
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