Jersey closes VAT loophole

Jersey has cracked down on a tax loophole that allows suppliers of low-value goods to benefit from 'low-value consignment relief', allowing goods worth less than£18 to be imported into the EU without value added tax.

This has been exploited by businesses selling directly to internet users in Europe and is prevalent in the distribution of CDs and DVDs, including web site sales from Tesco, Asda, Boots, Woolworths and Amazon.

Under a new licensing system, those UK companies operating through Jersey-based distributors will have to pull out within a year.

However, the loophole remains in place in neighbouring Guernsey - where HMV operates - to which many retailers are expected to move.

Several companies also have licences without time limits in Jersey and they will not be affected by the legislative change.

Jersey has been resisting pressure from the UK Treasury to reduce the low-value threshold on VAT exemption.