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Finance Act 2012

Background Note

6.Article 23 of Council Directive 2009/132 provides for Member States to exempt from VAT goods of negligible value imported into the European Union.  Member States may set the threshold for exemption at between €10 and €22 (between £9 and £20).  The relief is implemented in the UK by Item 8 of Group 8 of Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984 (SI 1984/746). Recital 5 of Council Directive 2009/132 makes granting of the relief (at any level) subject to the condition that it is not liable to affect the conditions of competition on the market.  Article 23 of the Directive also allows member states to exclude from the relief goods which have been imported by mail order.

7.In Budget 2011, the Chancellor of the Exchequer announced a reduction in the threshold for LVCR from £18 to £15 with effect from 1 November 2011. He also announced his intention to explore further measures to prevent exploitation of LVCR as it was never intended that LVCR should be used in this way.

8.Most LVCR trade is from the Channel Islands. The Government therefore concluded that the supply of mail order goods to UK customers from the Channel Islands was affecting the conditions of competition on the UK market. The Chancellor therefore announced on 9 November that LVCR would be withdrawn completely for all goods imported on or after 1 April from the Channel Islands.

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Explanatory Notes

Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.

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