Effects on the Channel Islands of abolishing LVCR

14 August, 2011
4 min
Effects on the Channel Islands of abolishing LVCR

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 unaffected.

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 government 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:

LVCR in the Channel Islands

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.

More Information

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

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.

Reporting of LVCR changes on BBC Channel Islands

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Author

Phil de Gruchy

Phil is the owner of Blue Llama, a digital agency in Jersey, Channel Islands. He has worked in digital for most of his career and has a wide knowledge of UX, web and app design and digital marketing.

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