The trade in discount vitamins and other consumer goods from the Channel Islands will be significantly curtailed after the UK government closes a notorious tax loophole in April 2012.
A scheme known as Low Value Consignment Relief (LVCR) has allowed companies operating from Guernsey and Jersey to sell a range of good such as vitamins, CDs, DVDs and contact lenses 20% cheaper than their mainland competitors.
The LVCR was launched in 1983 for sales transaction below £18 in the belief that collecting VAT on low cost items would outweigh the VAT loss to the exchequer. But the huge rise in online sales in recent years, and the fact that larger orders were simply being broken down into smaller consignments, has led to a glaring market distortion. In recent years a number of major retailers have started operations on the islands simplyto take advantage of the tax loophole.
David Gauke, Exchequer Secretary to the Treasury, told the Daily Telegraph: ”These reforms will ensure that UK companies, especially small and medium-sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands.”
The Health Food Manufacturers Association (HFMA) has welcomed the move, but says it will pushing for further regulatory alignment of Channel Islands-based businesses. The HFMA’s executive director, Graham Keen, told Natural Products: “Our Unfair and Illegal Competition (UIC) campaign has been front and centre for us for several years now, and we remain the only UK trade association that has been active, or frankly even interested, in this huge issue.
“This is very welcome news, but for us this was always first and foremost about ensuring that all companies throughout the UK, including the Crown Dependencies, were operating within the same regulatory framework. We are continuing to press hard for the Channel Islands authorities to implement the appropriate food law to ensure that CIs-based companies are obliged to meet the requirements of UK and EU food law, thus enabling our members, and all UK companies, to compete on a level playing field.”
• Guernsey-based company Healthspan, which has frequently used its advertising to taunt mainland UK retailers and supplement brands over their pricing, says it is considering mounting a legal challenge to the Government’s decision to end LVCR.
