By Claire West

The Forum of Private Business is using the third annual UK Independent Record Store Day to keep up the pressure on the Government to close the Channel Islands VAT loophole.

For over a decade the loophole, known as Low Value Consignment Relief, or LVCR, has allowed supermarket giants and major online retailers to avoid having to charge VAT on items worth less than £18.

By setting up distribution centres on the Channel Islands, the companies have been able to undercut their smaller rivals on the mainland when selling items like CDs and DVDs.

However, following sustained campaigning from the Forum and pressure group RAVAS (Retailers Against VAT Avoidance Schemes), the loophole may now be finally closed.

In his recent Budget, Chancellor George Osborne indicated that the Government was set to tackle the problem soon and announced an immediate £3 cut in the value of goods which could be mailed out from the Channel Islands without attracting VAT.

No specific measures have yet been announced to close the loophole for good but the EU has indicated that it will take steps to tackle abuse of LVCR if the UK Government fails to do so soon.

Jane Bennett, head of campaigns at the Forum, said: “Currently, virtually all the main players in the music industry mail CDs out from the Channel Islands to customers who have bought them online.

“This means their prices are automatically 20% cheaper and independent retailers on the mainland, whether online or shop-based, simply can’t compete. However, following the Chancellor’s comments in the Budget, and the EU’s intervention in the debate, it appears that we’re finally going to see the end of this unfair and uncompetitive practice which has gone on for far too long.

“Hopefully, we will see a level playing field soon and independent record shops will be able to compete with the big boys on equal terms.”

Former Forum member Richard Allen, who has campaigned against LVCR abuse for six years through campaign group RAVAS, recently received a letter from the EU Commission saying that it would take action to effectively close the loophole if the UK Government failed to do so.

Mr Allen, whose own online music mail order company went bust trying to compete with Channel Island-based rivals, said: “For a long time, this problem has been the elephant in the room, with VAT-charging retailers afraid to discuss it because ultimately, the customer wants to pay less.

“But the removal of this unfair advantage can only be a good thing, both for record shops and for the customer as currently, it’s very hard to find a good selection of CDs, DVDs and LPs anywhere on the chain store-dominated high street.
“There just isn’t any variety and this is terrible — especially in a country where around 40% of people still buy their music on the high street, rather than going online.”

The Forum has been actively campaigning against unfair business practices such as the Channel Islands VAT loophole through its new campaign, Get Britain Trading.

Through the campaign, the Forum is also calling for other tax avoidance schemes used by multi-national companies to be closed - and for an end to big businesses using their suppliers as sources of free credit through late payment practices