Online retailers squeezed by the Treasury but it won't be the death knoll for the cyber high street – EY

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Simon Baxter, Head of the Indirect Tax Retail Team at EY, comments on HM Treasury’s announcement today on Low Value Consignment Relief:

London, 9 November 2011: “Removing the Low Value Consignment Relief (LVCR) for goods sent to the UK from the Channel Islands is designed to create a level playing field between retailers operating on the high street and those using the relief to boost online sales. The withdrawal of the £15 relief - under which goods posted from the Channel Islands, like CD's DVD's and contact lenses, are VAT and Duty free - will impact on the margins of those businesses, but it will certainly boost the Treasury's coffers.

“It's too early to tell whether the Channel Islands or any of the retailers will challenge the proposed restriction. LVCR is an EU-wide relief and the Channel Islands are not the only location where these benefits may be available. Many businesses consider a move outside the EU to countries like Switzerland where this, and other tax benefits, could be enjoyed. However, retailers would have to carefully weigh up the tax advantages with the increase in postage and delivery costs.

“However, whilst the changes are likely to push up the cost of CDs and DVDs from April next year, it won't sound the death knoll for online retailers. It’s worth remembering that many using the LVCR relief also have a high street presence, which will be boosted by the changes. Retailers know that to survive and grow in the current climate, a multi-channel presence is fundamental to their forward strategy - online e-tailing, bricks and mortar and international expansion are absolutely the focus right now.””

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