Budget 2011 – VAT: Low Value Consignment Relief
The Government have announced that new legislation will be introduced in Finance Bill 2011 to reduce the level at which the low value consignment relief (LVCR) applies from £18 to £15 from 1 November 2011. This is the threshold below which goods imported from outside the EU are VAT-free. This move is part of the Government’s plans to tackle the VAT loophole used to import low value items, such as DVDs and CDs, into the UK.
The Government will also explore options with the European Commission to limit the scope of the relief, including the possibility of seeking derogation from the relevant EU rules.
It is the Government’s intention to stop the LVCR from being exploited for a purpose for which it was not intended and to improve the competitive position of UK small and medium enterprises. The cost of the LVCR to the Exchequer has risen significantly over the past few years reflecting the growth of internet shopping and the willingness of UK companies to relocate their operations outside the EU to exploit the relief.