The English High Court has ruled that the government may close a tax loophole allowing online retailers to ship low-cost goods from the Channel Islands VAT free.
Chancellor George Osborne said in November 2011 that the Low Value Consignment Relief (LVCR) provision would be abolished on 1 April 2012.
The plan was challenged in the High Court the Governments of Jersey and Guernsey, which claimed the ban would not only discriminate against its exports but was also illegal.
However, the Court yesterday ruled that the Treasury was was within its rights to abolish LVCR.
LVCR allows companies to ship goods priced at less than £15 to be shipped into the UK from outside the European Union without attracting the 20 per cent VAT sales tax. It was originally implemented to speed the import of small shipments of perishable goods into the UK.
However, many online resellers have cottoned on to the loophole during the past two decades, most notably shipping CDs, DVDs and, more recently, Blu-ray Discs from Jersey and Guernsey, which are not part of the EU, to allow them to offer buyers even lower prices.
The practice, the Treasury has estimated, costs the Exchequer around £110m a year. ®