Will Jersey loophole be plugged?

When the Big Four firms get around to producing predictions for Budgets and
pre-Budget reports, they often have ideas on what loopholes the chancellor may
seek to close.

One loophole they keep a little quieter about is that which allows retailers
to avoid VAT by selling CDs, and other items, from offshore tax havens like

The trick, used by some of the big retailers, is a touch too close to the
homes of the Big Four’s clients.

The ruse has been used by many different companies, with Dollond &
Aitchison recently falling foul of the rules in their attempt to use such a

Goods below £18 sold from Jersey qualify for the exemption. Dollond &
Aitchison had been avoiding VAT on contact lens packages that fell below that
level, but the ECJ ruled that eye tests bundled into the package carried them
over the limit.

A number of other companies have used the £18 loophole, including HMV, Tesco
and Amazon.

The Forum of Private Businesses has taken exception to the practice,
representing as it does the small businesses, which it says have ‘gone to the
wall’ as a result of the competitive advantage the big retailers get from it.

The authorities in the countries are moving to clamp down on the issue, with
Jersey pledging to remove licences for companies that are effectively only using
the island for storage and not buying.

Companies judged to be operating in that way will not be allowed to do
business from the island.

The FPB expects the move will have little effect, however. ‘To a certain
extent we have been here before. Jersey put out a similar statement in November
and it didn’t follow through with it, so there’s a lot of rehashing here.’

The FPB wants the UK government to stamp it out by changing the rules for
importing into the EU. Guernsey’s department of commerce has already warned that
there will not be opportunities there for new companies to move in.

Will this issue be on Gordon Brown’s list for March 22, if not the Big

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