Online shoppers could see prices for some DVDs, CDs and games rise after the UK Government announced plans to close a tax loophole used by many major retailers.
Many companies have set up distribution facilities in the Channel Islands to benefit from rules which allow items to be shipped to customers from outside the EU without VAT being charged.
However the Government says the rule which allows this, known as Low Value Consignment Relief, will be scrapped from April 1st.
LVCR was originally set up to avoid retailers collecting small sums of VAT on items shipped from outside the EU where the costs of doing so exceed the VAT liability.
As the Channel Islands are considered to be outside the EU for VAT purposes, retailers were able to take advantage of the relief and offer consumers lower prices.
The loophole was seen as giving large retailers an advantage over smaller companies which were unable to match prices.
David Gauke, Exchequer Secretary to the Treasury, said the changes “will ensure that UK companies, especially small and medium-sized enterprises, can compete on a level playing field with those larger companies with the resources to set up operations in the Channel Islands.”
