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back to article High Court confirms 'cheap DVD' tax loophole will close

The English High Court has ruled that the government may close a tax loophole allowing online retailers to ship low-cost goods from the Channel Islands VAT free. Chancellor George Osborne said in November 2011 that the Low Value Consignment Relief (LVCR) provision would be abolished on 1 April 2012. The plan was challenged in …

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Anonymous Coward

Meanwhile...

...major corporates continue to avoid paying any tax with the blessing of HMRC. But so long as the public get it in the neck, who cares?

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FAIL

Re: Meanwhile...

Couldn't have put it better:- even when we found out companies have been dodging billions in tax (vodafone) we sit on our hands.

Yet for the everyday punter trying to save a few quid on a film, you receive the cold unflinching shaft of the tax man.

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Unhappy

Re: Meanwhile...

If they wanted to save 100M quid then about not using the assclowns at EDS (now HP?) for IT contracts and let the taxpayer at least enjoy slightly cheaper mail order goodies.

Oh feck... there's a budget round the corner, too, isn't there. Deep joy.

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Big Brother

Re: Meanwhile...

"All your monies are belong to us".

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Anonymous Coward

Re: Meanwhile...

Those would be the same major corporations who benefit from this relief.

Most of the goods I've seen shipped by Play, Tesco, etc are only marginally cheaper than in the shops (if at all), and certainly not the entire VAT saving. That means these companies are making even more profit from the customer, not paying the VAT on the sales, AND not paying the Corporation Tax on the profits.

I think you'll actually find the public will benefit from this change. The price of goods wil not go up as they are usually sold at a price point (£9.99 ring any bells) instead of a direct relationship to cost.

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FAIL

Here we go again.

£110M/year in lost taxes on overpriced DVDs

£50,000M bank bailout.

Which do you think bothers me more?

Especially when the ************************ still want to charge me 3.7% interest on my mortgage.

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Facepalm

Yes, George,

consumers will happily pay more for their entertainment media, happy in the knowledge that this will help swell the government coffers, letting you pay off that massive deficit that we all caused.

There's simply no way that people will switch to illegal downloads, and HMV will be saved!

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Paris Hilton

Discriminatory?

Am i the only person who thinks the Govs of Jersey and Guernsey are insane for trying to claim that it's discriminatory that the unfair advantage they have is being closed?

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Re: Discriminatory?

Given that Jersey and Guernsey's entire existence is based on tax-dodging, anything that closes a tax loophole is clearly discriminating against them.

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Anonymous Coward

Re: Discriminatory?

The thing that is discriminatory is that it is only being closed for the Channel Islands. The retailers can relocate to another country such as Switzerland and continue to exploit it.

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Re: Discriminatory?

They're outside the EU so they probably don't see it that way.

I expect they think that simply being close to another EU country doesn't mean you should have a different set of rules that only apply to you.

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Is this just on these dvd or on all imports?

I buy quite a lot of cheap electronics components from ebay from china. Usually costing just a few £. If I had to pay 20% vat on them, that's one thing... but no doubt the post office will add an £8 handling fee each time too that you can't avoid making in entirely uneconomical to buy stuff in this way.

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xyz
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Pirate

err...

.....and do you have an HMRC commodity code so you can pay the import duty on those items. Just sayin'

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Re: err...

No need. Royal Mail with do this auto-magically and then scalp you for the "service".

Top tip - phone up HRMC, get the codes and DIY. The people on the phones actually seem like a decent lot.

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Does it matter?

isn't everyone moving to online sells now anyway or just down load there movies from bit torrent?

it won't have any difference to the high street

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HMRC - The folks who tax fun!

Now there's an advertising slogan.

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I was going to call them all wankers, but then after a moments thought I remembered physical media is a dying breed anyway and this dosnt affect me.

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Flame

It wont affect me.. there is no Hollywood dross that is so compelling that I want to buy it NOW... Like much of the recycled stuff in our charts now (That turgid cover of Heart's '80's ballard Alone for example.) Anything that comes out that I might have obtained via that route will now be deferred for a while.

Boot sales and ebay will provide what I want... and if I have to wait a while for it to filter down to the second hand market - thats fine too.

This Governement seems intent on grinding us serfs into the dirt with cuts and taxes, Just means that I will have to look at alternatives.... my income is falling, thanks to cuts and the CPI/RPI deception. the money doesnt exist to pay additional taxes.. the loss of a discount purchase channel is a factor that I bet the MAFIAA will overlook when they next bleat about falling sales.

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Alert

Absolutely

Buy secondhand. Not like DVD/BluRay fades with age is it.

In fact getting as much of what you want right now is probably quite important as the games market is shifting away from discs for the next gen, you can bet the MAFIAA will, too, so the window of opportunity to 'own' your media is rapidly closing, then it'll all be DRM'd cloud 'owned' virtual stuff you have no control of.

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Parkinson's Law of Triviality

This is a classic example Parkinson's Law of Triviality, also known as bikeshedding.

In 1957 Parkinson's put forward the argument that organisations give disproportionate attention to trivial issues. Parkinson gave the example of a committee responsible for building a bike shed and a nuclear power station. The committee are happy to sign off on the power station based on the management summary because of 2 reasons 1) they haven’t an effing clue about how a nuclear power station works and 2) the amounts of money involved are meaningless as they are out of the range of their life experience.

However when it come to building a bike shed for £200 everybody has an opinion.

For the small minded taxman it works like this:-

Owe the taxman £200; That’s a nice DVD surround sound system.

Owe the taxman £2,000; That’s a nice package holiday.

Owe the taxman £20,000; That’s a nice big car.

Owe the taxman £6,000,000,000; That’s a “how can we help you sir, that number incomprehensible to me”.

I’m also sure that the copyright mafiaa did some bribing lobbying on this to ensure the plebs pay more for their music.

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Copyright mafia

"I’m also sure that the copyright mafiaa did some lobbying on this to ensure the plebs pay more for their music."

Erm... why? The content producers have nothing to gain from this. Low taxation keeps pre-tax sales prices high, so I would imagine it means the label's share of the sale stays up. Slightly lower prices also lead to slightly higher sales, so they win again.

You don't like record labels -- fine. But don't blame them for every evil in the world.

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I do have some sympathy...

for the flower-growers etc. - the original arrangement was perfectly sensible, and benefited all concerned. Then along come amazon and friends and ruin it for everyone.

If the States had been sensible they could have avoided this by imposing their own tax on *exports* of DVDs etc, so that it wouldn't have been worrthwhile for amazon to sell from the Channel Islands, and the flower growers could have happily carried on. I suspect the flower industry earns a lot more real cash for the economies of the CIs than they actually get from dvd sales.

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Why should the copyright mafiaa give a toss?

The increase in price for the comsumer will be tax, and therefore go straight to the government coffers, not those of the movie/music industry.

Did I just sort of defend the mafiaa then? Think I need to go and lay down.

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Re: Why should the copyright mafiaa give a toss?

Conceivably, if the prices of buying physical media goes up as a result (admittedly unlikely, just less profit for resellers or switch to another loophole), that allows media industry to either put their prices up on downloads or at least point to now slightly higher prices as justification.

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Anonymous Coward

Where would HMRC and Government be best focusing attention?

The [LVCR] practise [...is estimated to have been a loss to HMRC of...] £110 M.

Lets put some context around that. In 2010, Barclays bank should have paid circa £2.2 Bn in Corporation and other tax to HMRC, based on its declared financial position in that year - It actually paid (and got away with) paying only £112 M. That's just one business 'getting away with it", it would appear...

So, again, I ask where would the HMRC and Government/Treasury best put its effort to improving Tax Collection Efficiency?

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Mushroom

Re: Where would HMRC and Government be best focusing attention?

Could I refer the learned Gentleman to the retrospective legislation the present day Government is to introduce to stop this bank from avoiding tax?

BTW Tax avoidence is not currently illegal - currently!

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Re: Where would HMRC and Government be best focusing attention?

It was a one off, targeting one type of transaction, just one bank was doing. Everything solved with corporate avoidance then. No wonder they are now targeting joe blogs.....

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Anonymous Coward

"costs the Exchequer around £110m a year"

Alright it's not an insubstational amount but bugger me, how about we simply round up some of these lying scumbag CEOs who skive out of the country owing £10m a pop in back taxes, we'd soon the UK back on it's feet and still be able to buy cheap DVDs and SD cards from Jersey!

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Megaphone

Costs

So the estimate is that HMRC lost £110m/yr. How much would they have spend collecting the taxes? When the scheme was first set up part of it was to speed up perishable goods, but also because the cost of collecting the tax was more than the tax was worth. With computerised systems the cost of collecting the tax is probably quite cheap but it'll still cost HMRC a few million to collect.

However what has been assumed is that all those CD sales would still carry on but with the VAT on. They won't. Like with pirating video, many will just go elsewhere to get the CDs. Some will not buy, others will buy from foreign places like Hong Kong. So the actual VAT recovered will probably be a good percentage of the £110m/yr estimate.

Also take into account that the companies will make less profit on their sales as it all goes to the VAT man. Originally that profit would have gone to workers in terms of salary and to the shareholders via dividends. Considering that major shareholders tend to be pension companies pensioners will possibly be deprived of a few pence because of this move.

Then there is the cost of enforcement to catch the abusers of the system. Add that cost and the overall figure will probably be a few million extra into the Treasury's coffers.

I suppose every little bit helps.

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Original complaint

Didn't just come from the usual suspects, but from The Guardian.

http://www.guardian.co.uk/business/2012/mar/15/vat-loophole-on-cds-closed?INTCMP=SRCH

It'd be nice if the taxman went after Beardie Branson et al. with the same amount of enthusiasm he's had for this case.

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Headmaster

Is anyone really going to notice...

If the price of the cheap DVD they get off Amazon goes up from £1.50 to £1.75? Didn't think so.

If it means it makes sense for companies to be based in the UK, selling stuff in the UK, then it's not really a problem. I seem to recall the occupants of the Channel Islands being rich enough already.

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Facepalm

Maths Fail

Of course, that should have read £1.80

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@occupants of the Channel islands being rich enough

If you look beyond the fat cat incomers at the ordinary working people then no, they are not especially well off. Rather the reverse. And no doubt a good number of jobs will be disappearing with the warehouses, and last time I was involved with the Islands jobs were not that plentiful. So its easy to figure why the States wanted to encourage new jobs on the Islansds, especially low value jobs for the locals. Whether the jobs did go to the locals or to dubious immigrant labour mght be another matter of course, I have no idea.

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Anonymous Coward

Re: Is anyone really going to notice...

Just because a small number of wealthy people might choose to live here, don't assume the rest of us are.

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Anonymous Coward

Re: "dubious immigrant labour "

I can only hope you're not planning any holidays in Brittany or Normandy any time soon, as that wasn't a nice way to describe their inhabitants. Even though they're really dubious in St Lo, I'll agree to that.

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Meh

Rarely buy it new

Old school alert: I prefer discs in boxes, and books made from paper.

I stopped using the likes of Play.com long ago when I realised that I could buy near-perfect products from Amazon's third party sellers for pennies plus postage. So long as I don't want the latest releases (I can wait a year or so for used copies - nothing is THAT urgent) I can get something which has probably been played (DVDs) or read (books) only once or twice, and so isn't in any worse condition than it ends up being once I've used it myself.

I make an exception for boxed sets, which don't usually end up much cheaper from third party sellers, but those are usually priced above the £15 limit so presumably include VAT anyway.

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Anonymous Coward

Starve the beast

Starve the beast by buying second hand from individuals.

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Holmes

Re: Starve the beast

Firstly there has to be a first hand market for a second hand market to exist. So the impact would be limited.

Secondly if many more people start buying second hand the prices will rise until they are almost indistinguishable from the prices of the 'new' product. Just look at ebay where second hand goods are bid to within pennies of the RRP and pretty often above what many retailers are asking for new.

I probably wouldn't have bought half the books (DVDs or Blu-ray) that I currently own were it not for the loophole. I can't really be the only person who remembers what the prices were like before Play appeared on the scene. Some people seem to think that prices won't rebound back to those levels now but as much as I'd like to believe that it's just not how the world works.

As for the poster who suggested that no-one buys the physical product any more and that streaming is a viable alternative ... WTF? I didn't go out and buy an expensive 1080p TV to watch crappy quality internet video with bitrates and picture quality that at times are barely better than VHS, let alone DVD or Blu-ray. Seriously ...

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Good for consumer spending!?

I am happy the economy is so good, that the Chancellor can do things that might harm consumer spending...

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Facepalm

Shame. As a consumer it was nice whilst it lasted.

But I feel sorry for the couple of dozen companies and hundreds of people on the islands that will be made redundant due to this 'fix'.

It'll hit the islands hard....

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Silver badge

"I feel sorry for the couple of dozen companies and hundreds of people"

True, but then again, they also displaced a similar number of jobs on the UK mainland due to the loophole.

While I don't feel much sympathy for HMRC generally, I don't think such an import tax-relief scheme is fair to UK based companies. Sure, keep relief for goods *made* in those islands, but for the multi-nationals like Play & Tesco, etc, using it as a dodge?

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