Opinion

VAT changes in the Channel

The VAT rules that allow firms in the Channel Islands to undercut UK mainland rivals are looking like they're about to end.

Originally set up to help Guernsey flower growers, the VAT exemption allows traders to despatch items priced under £18 without any VAT and has been used by Tesco and Amazon (and plenty of others) to sell, amongst things, CDs, DVDs and inkjet cartridges at lower prices than those on the mainland could ever achieve.

The Treasury reckons it loses £130m a year in VAT through 'abuse' of the system, others think that figure is too low. Either way, when the exemption goes it's going to (a) potentially put a number of firms in the Channel Islands out of business and (b), hopefully give a boost to retailers in the UK. 

This was first published in March 2011

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