Skip to main content

Cost of Cheap Tech Gadgets to Rise after VAT Free Loophole is Squashed

Companies that sell cheap goods to the UK via the Channel Islands to avoid paying Value Added Tax will no longer be able to do so, as that loop hole will be closed from the 1st of April.

A number of big companies which set up fulfilment warehouses on the island were able to send DVDs, CDs and small electronic items worth less than £15 to UK customers VAT free, saving up to £3 on each unit.

The BBC reports that the changes come in response to the economic situation in the UK, and the fact that the loophole represented a significant loss for the British economy.

Tax Campaigner Richard Allen said "the Channel Island's VAT loophole has over many years destroyed livelihoods and caused much misery in the UK business community".

This is because for many years, the loophole allowed bigger companies with the financial clout to set up business in the Channel Islands to thrive, while smaller ones which couldn't match them suffered or had to close down.

More than 17,000 people are employed in the fulfilment industry in the Channel Islands according to the latest figures; surprisingly the abolition of the £15 threshold will not affect other non-EU jurisdictions, possibly because it would not be economically viable to replicate the system.

Desire worked at ITProPortal right at the beginning and was instrumental in turning it into the leading publication we all know and love today. He then moved on to be the Editor of TechRadarPro - a position he still holds - and has recently been reunited with ITProPortal since Future Publishing's acquisition of Net Communities.