By Daniel Hunter

A court has ruled that a VAT loophole exploited by the likes of Amazon and Tesco operating in Guernsey and Jersey will be closed.

The big name companies were taking advantage of Low Value Consignment Relief (LVCR). Seeking to continue LVCR’s application to the sale of goods such as CDs, DVDs, and contact lenses, the Channel Islands took the Treasury to judicial review last week and lost.

The Channel Island governments were battling Chancellor George Osborne’s decision to target greater funds through the abolition of LVCR announced in last year’s Budget.

“From 1 April thousands of items valued under £15 will carry VAT. Channel Islands based companies will have to pay sales tax and their prices are expected to rise," said Ruth Corkin, Head of VAT Services at accountants and business advisers James Cowper.

“We expect local suppliers to in future become more attractive to consumers, generating a welcome boost in sales for many small shops and internet traders in the South East.”

Hundreds of mainland businesses have been forced to close since the late 1990s when sellers first started to take advantage of LVCR.

“Rumour has it that the big companies will move their operations to somewhere like Switzerland but before that the Channel Islands governments might appeal and test the decision in the European courts,” Corkin added.

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