The government has announced that from 1 April 2012, it will abolish the 'special VAT relief' currently available to businesses that import goods from the Channel Islands to UK customers, such as DVDs, printer ink cartridges and the like.
For many years, businesses based in the Channel Islands have benefited from "Low Value Consignment Relief" ("LVCR") which meant that they didn't have to charge VAT on goods sold to mainland UK customers provided their value was less than £18.(But see below).
The LVCR rule applies broadly for all such imports into the EC (save for alcohol and other excise goods) but because of its close proximity to the UK, businesses in the Channel Islands were particularly well placed to benefit from this rule, which was intended as an administrative easement for low value goods.
In the last few years, however, their so-called "Fulfilment Industry" has grown exponentially, whereby larger companies operating in the UK have relocated their Internet/Mail Order facilities to the Channel Islands en masse, and have been able to undercut their mainland competitors - who still had to charge UK VAT - in the process.
One of the critical factors to the success of the LVCR Fulfilment Industry for the Channel Islands, has been the relatively low postal charges involved, because of their historic ties to the UK. The government has confirmed that this change in the rules will only apply to imports from the Channel Islands, but HM Revenue & Customs has said that it doesn't expect Fulfilment businesses just to relocate elsewhere (say, the Canary Islands which are also outside the EC) because of the much higher postal costs and administration involved.
Many readers will be aware that the original £18 threshold for "Low Value" goods was reduced to £15 for imports from 1 November 2011; this reduced limit will continue to apply for goods imported from other non-EC countries and gifts will likewise be unaffected.
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