Solicitors & tax specialists

Ann L Humphrey

From complexity to simplicity

Taxidermy: getting under the skin of tax law

MiPod: a matter of taste
06.06.10

I’ve finally given in and bought myself an iPod. It’s unlike me to resist a gadget this long but I must have known how it would go. Now I am loading my entire music collection on to it. ‘Feed me, Seymour, feed me’ says iTunes each time I walk past my laptop.
Apart from consuming inordinate amounts of time, this exercise has led to some interesting discoveries. I hadn’t realised, for example, that there were so many references to Customs’ officers in Carmen - but then I’d forgotten about all the smuggling. I also learned that the title of the Cherubini opera ‘Les Deux Journées’, refers to the two days in which Cardinal Mazarin imprisoned the President of the French Parliament for vetoing his tax laws. Jean-Baptiste Colbert, who succeeded Mazarin and became finance minister to Louis XIV, is reputed to have said that ‘the art of taxation is to pluck the maximum number of feathers from the goose with the minimum amount of hissing’.
I’m not an opera buff – I admit to falling asleep in La Somnambula – and most of my friends would roll their eyes if asked to comment on my taste in music (Sa Ding Ding, Nusrat Fatah Ali Khan, Nitin Sawhney and Sigur Rós are amongst my favourites). Now putting my iPod on shuffle gives me the opportunity to lull them with a little Mozart before hitting them with the Pogues.
When it comes to purchasing music, it’s worth remembering that consignments of goods with a combined value of less than £18 qualify for relief from UK VAT and import duty. This explains why it’s often cheaper to increase your CD collection by buying from a supplier based outside the EU (the Channel Islands, for example), and is also the reason why your order may arrive in more than one package. If you download music, different rules apply and UK VAT is chargeable where the seller is based outside the EU. As with all things VAT-related, however, nothing is as it seems - the Isle of Man is not outside the EU for this purpose but the Channel Islands are. 
For anyone who ever wondered what accountants would come up with if they were to allowed to pitch their song ideas, there was an email doing the rounds a while ago with a few possible suggestions. Have a look at these three which amused me:
#1Submitted by ann on Fri, 25/03/2011 - 13:29.
LVCR is an EU relief. Article 23 of Directive 2009/132 provides that goods of a total value of less than €10 must be VAT-free when they are imported into the EU.   Article 23 allows Member States to increase this limit to a maximum of €22. The current UK limit of £18 is laid down by the VAT (Imported Goods) Relief Order 1984.
 
From 1st November 2011 LVCR will be reduced from £18 to £15. As many of the commentators on this change have pointed out most DVDs and CDs cost less than £15 so what’s the point?
 
Apparently the annual cost of LVCR to the UK has risen from £85m to £130m over the last five years, reflecting the growth of internet shopping and the willingness of UK companies to relocate their operations outside the EU (mainly in the Channel Islands) to exploit the relief.  The UK government are intending to discuss ways of preventing exploitation of LVCR with the European Commission and if a workable solution cannot be found LVCR will be reduced further. 
 
Those of you who have read Spilling the beans or its a mug's game will be alarmed to  hear that the change will mean an increase in the number of packages where the UK Border Agency has to apply a VAT charge manually.
#2Submitted by ann on Sun, 13/11/2011 - 12:27.

LVCR will not apply to supplies of goods from the Channel Islands from 1st April 2012.  The changes were annouced by the Exchequer Secretary to the Treasury in a Written Ministerial Statement on 9th November 2011.

Draft legislation will be published on 6th December and will be included in the 2012 Finance Bill.
#3Submitted by ann on Mon, 14/11/2011 - 15:28.

It is understood from news reports that Healthspan, a supplier of health supplements from Guernsey, is considering challenging the proposed change on the grounds that, as article 23 of Directive 2009/132 gives Member States the power to exclude from LVCR goods which have been ‘imported on mail order’, the change cannot be limited to mail order goods from one area but must apply to all such goods otherwise it is discriminatory.
#4Submitted by ann on Mon, 19/03/2012 - 11:40.

A challenge by the Guernsey and Jersey governments to the LVCR changes has failed according to a recent article in Accountancy Age.  There is also coverage in the Guardian.  This means that from 1 April 2012 the LVCR will no longer be available for imports from the Channel Islands. It has been suggested that some of the large retailers affected by this change will simply move the operation to another non-EU country such as Switzerland.
#5Submitted by ann on Tue, 27/11/2012 - 12:03.

The Guardian has recently reported that online retailer, The Hut, has closed its warehouse in Guernsey and is now shipping from a site outside Chicago to preserve its entitlement to LVCR.

Plus ça change ...
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