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Effects on the Channel Islands of abolishing LVCR

Phil de Gruchy / Sunday, 14 August 2011 18:51

In November, the low value consignment relief (LVCR) threshold in the UK will be cut from £18 to £15. This means Channel Island companies exporting to the UK will have to pay VAT on goods over the value of £15. While this will certainly hit the Channel Island e-commerce industry, the majority of goods, typically DVDs, CDs, printer cartridges and memory cards are priced below £15 and will be uneffected.

The big concern is that this move is just the start of a strategy to remove LVCR altogether or lower the threshold to a level that provides no advance to Channel Island businesses. From what has (and hasn't) been written in the press, either the States of Jersey and Guernsey are unable to fight the UK goverment, or are not even prepared to go into battle. Should they just stand by, or is there reason to fight? I've taken a quick look at some of the potential effects that may result if LVCR is abolished:

Effects on the Channel Islands of removing UK LVCR:

1. Loss of jobs especially unskilled fulfillment positions. Estimates range from 250 to 3,000 positions.

2. Increasing reliance on the dominant Finance industry by reducing the diversification of industries operating in the islands.

3. Increased postal costs and/or loss of post office jobs due to a downturn in postal volumes.

4. Increase in freight costs into the island. Jersey and Guernsey import a huge amount of goods from the UK, the freight cost is currently offset by LVCR packages on the return leg of the journey.

5. Impact on telecoms and IT sectors that support the industry.
...???

Share your Thoughts

Should more be done to stop the LVCR threshold being reduced further? Are there additional impacts on the Islands' economy not mentioned above? Should we just bite the bullet and start looking at new growth areas like E-gaming? Please share your thoughts below.

More Information

Further reading?
Tax News: Jersey considers impact of LVCR changes
Business Life: The End of LVCR?

Reporting of LVCR changes on BBC Channel Islands

Phil de Gruchy is a freelance e-commerce web designer based in Jersey. He builds websites on free open source content management systems there by greatly deducing the costs for his clients. As well as web design, Phil also provides digital marketing services and web strategy advice to small businesses.
Follow @PhildeGruchy

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