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Generally imports into the EU are charged VAT. VAT is normally due at the same rate as on the supply of those goods in the relevant Member State. Under European VAT law all Member States are required to exempt from VAT commercial consignments worth €10 or less.  This is known as ‘low value consignment relief’ (LVCR). Member States may apply a higher threshold up to €22 and the UK has does this in the past.  Provision is made for a higher limit to apply for personal gifts. VAT is not chargeable if the value of a gift is €45 or less, if it has been sent from one person to another, if there is no commercial or trade element, and it is of an occasional nature only – say, for a birthday or anniversary. For gifts of alcohol, tobacco, perfumes or toilet waters, an additional limit is set to the volume or quantity sent. The €45 limit for gifts has been in place for many years, though it has had to be adjusted to take account of changes in exchange rates. Since 1 January 2017 the limit has been set at £39.[1]

For VAT purposes the Channel Islands lie outside the EU. For some years there were concerns about the ability of some UK retailers to exploit LVCR by selling goods over the internet VAT-free from subsidiaries based in Jersey and Guernsey.[2]  For its part the Labour Government was reluctant to tackle this by cutting the threshold for imports, because of the extra demands this would place on HM Revenue & Customs, to calculate and collect VAT on a much larger number of parcels.  As an alternative approach, it sought to persuade the authorities in both Jersey and Guernsey to discourage companies setting up this type of business, with some success.[3] 

Despite this the practice continued with some retailers setting up subsidiaries in the Channel Islands to sell CDs and DVDs online.[4]  The Exchequer costs of the exploitation of this relief were estimated to have risen to about £140m by 2009/10.[5] In the 2011 Budget the Coalition Government announced it would cut the LVCR threshold from £18 to £15 from 1 November 2011 and “explore options with the European Commission” to prevent the relief being exploited “for a purpose it was not intended for.” At the time it was estimated that the £3 cut in the threshold would raise £5m in 2011/12, rising to £10m in 2012/13.[6]  In November 2011 the Government announced that it would legislate to withdrawn LVCR entirely from mail order goods imported from the Channel Islands, with effect from 1 April 2012.[7]  In March 2012 a legal challenge to this selective withdrawal of LVCR, brought by the Governments of Jersey and Guernsey, failed, and the changes took effect from 1 April as planned.[8]

This note gives a short summary of the way that VAT is charged on commercial consignments and gifts posted from outside the EU, before discussing this reform.


[1]     For guidance see, HMRC, A guide for international post users – Customs Notice 143, March 2017

[2]     For example, “Jersey to crack down on tax loophole”, Financial Times, 28 June 2005. On estimates of the tax lost to the Exchequer see, HC Deb 12 February 2009 c2148W; HC Deb 23 June 2009 c830W.

[3]     Budget 2007, HC 342 March 2007 para 5.142

[4]     “Sainsburys and Best Buy set up Channel Island websites”, Observer, 21 November 2010

[5]     HC Deb 28 March 2011 c39W

[6]     Budget 2011, HC 836 March 2011 para 2.158 (Table 2.1 : item 38)

[7]     HC Deb 9 November 2011 cc15-16WS; HM Treasury press notice 122/11, Government ends exploitation of Channel Islands VAT rules, 9 November 2011

[8]     [2012] EWHC 718 (Admin).  See also, HC Deb 25 April 2012 cc899-900W.  Provision to this effect was made by s199 of the Finance Act 2012.

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