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• LVCR Frequently Asked Questions

LVCR Frequently Asked Questions

From 1st April 2012, businesses exporting goods from the Channel Islands will no longer be able to use the Low Value Consignment Relief (LVCR) arrangements.

LVCR was applied to low value goods (valued at under £15.00).

What will happen if I do not pre-pay the VAT?

From 1^st April all commercial packets sent to the UK from Guernsey businesses will need to have paid the appropriate VAT charge. If the VAT is not pre-paid by the business, then if there is a risk that the person receiving the packet will be charged VAT at 20% on the value of the item, plus an administrative charge of £8 levied by Royal Mail.

HMRC Guide for international postal users

How will I be able to pre-pay the VAT?

If you are already a member of the Import VAT accounting scheme (IVAS), then you can pre-pay the VAT owed as per the arrangements you had with Guernsey Post prior to 1^st April. Whereas before 1^st April, VAT was not payable on items less than £15.00 in value, from 1^st April, all items will be charged at 20% of their value.

If you are not a member of the IVAS scheme, you can pre-pay any VAT owed when you post the items at a post office counter. Note that If you are a non-business user and are sending a gift to a friend or family member, then VAT is not payable on items valued under £40.

How will the change affect my business?

The effect of the changes will be to raise the cost of purchasing the items for the consumer in the UK. For example an item costing £10 prior to April 1^st will now cost £12 after that date. This will affect each business in different ways, but it may mean that many businesses are less competitive than they were under the LVCR regime. This may mean that some businesses will need to restructure to take account of the changes. It is unfortunate that in a number of cases this may result in job losses.

Who should I contact if the changes mean that I have to make staff redundant?

If an employer needs to make staff redundant, then it is important that they follow the correct procedures in order to avoid claims of unfair dismissal that may arise from their employees. Guidance should be sought from the Employment Relations team at the Commerce and Employment Department (see contact details below). The employer should also contact staff at the Social Security Department who will be able to guide employees through the process of seeking alternative employment, and if necessary applying for unemployment benefit.

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