VAT question (Channel Islands)

[sysops]

I'm trying to get my head around the situation with VAT on consumer goods coming in from Jersey and Guernsey.

As many of you know, quite a few online retailers operate from the CI, which gives them the huge advantage of not having to charge VAT on lower value consumer goods.

What defines whether something can be VAT exempt? Is it just the fact that it comes from the CI? Is it the fact that the purchase is made from a CI registered company? Or do both conditions have to be fulfilled?

 

[sysops]

Are you baiting me, Sysops, or is this genuine???

Have I missed a thread?

It's genuine, and it's prompted by a recent purchased from a CI company, which was dispatched from a UK warehouse, and shows VAT @ 0%. I thought I understood, but this has made me question my understanding.

 

[JamieM]

Hi sysops,

That's an interesting one.

I think that it's the fact that the purchase is made from a CI company. Given the fact that the goods are held in the UK I think VAT must have already been paid on them at some point.

I'm not sure though, would be interesting if someone could clarify.

 

[Protocol UK]

"The LVCR provision allows retailers to sell goods such as CDs, DVDs, computer games and contact lenses that are valued at under GBP18 VAT-free from Jersey and Guernsey back to the UK through websites. The Channel Islands are not part of the EU for VAT purposes and, therefore, goods under this value sent by mail order from the Islands are exempted from VAT."

I would have to question how they could be sent VAT free from inside the UK however.
Sounds risky to me.

 

[matt.chatterley]

"The LVCR provision allows retailers to sell goods such as CDs, DVDs, computer games and contact lenses that are valued at under GBP18 VAT-free from Jersey and Guernsey back to the UK through websites. The Channel Islands are not part of the EU for VAT purposes and, therefore, goods under this value sent by mail order from the Islands are exempted from VAT."

I would have to question how they could be sent VAT free from inside the UK however.
Sounds risky to me.

Yeah, snap. My understanding, following a hefty read through VAT documentation (and some other bumf), some time ago is as follows:

There is the Low Value provision - allowing anything under £18 to be sent from Jersey without incurring VAT. This applies to any business operating from the island - whether fully Jersey owned, or a subsiduary of a UK company - note that it is now nigh on impossible to set up a subsiduary here, though.

However, also, remember that Jersey (and the rest of the Channel Islands) are neither part of the EU nor technically the UK (this is arguable - in theory we are a Crown Dependency, typically counted as part of GB but not the UK - it all depends on who you ask, and what the weather is like today).

This means that theoretically (don't try this at home, kids), a business registered and based here is not liable to collect and pay VAT on any goods sent. HOWEVER, goods which are not covered by a standing exemption (e.g. LVCR) ARE STILL TAXABLE under VAT - and it is the recipient who is legally responsible for ensuring that any customers charges or regional taxes are paid.

I know of a few businesses who operate in this way - typically they "get away with it", but the odd customer package gets stopped in customs, and payment of VAT + an administration fee is required by HMRC before the package is released. Not good.

If your goods were sent from within the UK, though, then it is definitely dodgy - and probably best if you give the supplier a ring to clarify the situation. The last thing you want (or need) is for them to land you in trouble!

 

[matt.chatterley]

Have I missed a thread?

It's genuine, and it's prompted by a recent purchased from a CI company, which was dispatched from a UK warehouse, and shows VAT @ 0%. I thought I understood, but this has made me question my understanding.

Just to re-clarify, because my post rambled a bit.

I believe goods must be physically sent from the CI for any VAT exemption to count (in the case of low value packages), or for the VAT responsibility to be placed upon the recipient.

Sounds a bit iffy to me, therefore!

 

[JamieM]

There is a scheme where Play.com pre pay VAT on goods over the value of £18 coming in to the UK. I expect other mail order companies do the same. Therefore I expect any goods held in the UK will have had the VAT already paid or accounted for.

 

[Kevin Hall]

Goods transported into the UK from CI are VAT imports. If the value ofthe goods is under £18, no UK Import VAT is charged.

If the goods are already in the UK, no UK Import VAT applies.

The nature of your purchase will also affect the VAT position when the onward sale is considered. For example, if you buy a book, no UK VAT applies to the onward sale, even if the sale is deemed to have taken place within the UK.

As always with VAT questions, detail is all important. Could you tell us what sort of thing you bought?

 

[mediah01]

Sorry to resurrect this old thread but I needed some clarification.
If I purchase products from China, for example, and have them delivered to a fulfilment company in Guernsey and then they distribute to customers in the UK, would I have to pay VAT at any stage? (providing the goods are under £18 in value)

 

[Impressive Creations]

When I lived in Jersey I imported specialist building materials and never paid VAT, I now export to Guernsey and don't charge VAT.

Any material imported would be vatable but simply reclaimed in the usual manner.

2.2 Why does zero-rating apply to exports?

VAT is a tax levied on goods and services consumed in the EC. When goods are exported they are "consumed" outside the EC and to impose VAT on such goods would be contrary to the purpose of the tax. Therefore, the supply of exported goods is zero-rated provided certain conditions are met.

 

[matt.chatterley]

Sorry to resurrect this old thread but I needed some clarification.
If I purchase products from China, for example, and have them delivered to a fulfilment company in Guernsey and then they distribute to customers in the UK, would I have to pay VAT at any stage? (providing the goods are under £18 in value)

Potentially not, but you'd have to look out, as I know the UK government are keen to reduce/eliminate this type of activity - it's well worth taking "expert" advice before embarking down the road, just incase.

 

[mediah01]

Well my accountant is useless. When I asked for advice, he copied and pasted sections from the HMRC website in an email. Is there any expert here that has some experience with this? I would be willing to pay for their time.

 

[OffshoreSystems]

Sorry to resurrect this old thread but I needed some clarification.
If I purchase products from China, for example, and have them delivered to a fulfilment company in Guernsey and then they distribute to customers in the UK, would I have to pay VAT at any stage? (providing the goods are under £18 in value)

Yes you are correct there would be no VAT charge on the goods being delivered into Jersey and there would be no VAT charge when those goods are then exported back out as long as they are sold under £18. If you sell anything over £18 you would make your price enough to cover a VAT inclusive charge and it would then be prepaid when the item is sent out for delivery so it wont get stopped at customs, you would then have a VAT report run by your fulfilment company for you to make your VAT returns/payment.

If this is something you are looking into please message me to discuss further as this is exactly the type of service my business based in Jersey can provide for you.

 

[Kevin Hall]

Well my accountant is useless. When I asked for advice, he copied and pasted sections from the HMRC website in an email. Is there any expert here that has some experience with this? I would be willing to pay for their time.

I understand from you that the stages of transactions in ordinary goods are as follows:

1. Export from China (presumably effected by the supplier) and import into Guernsey.

2. Export from Guernsey and import into the UK (less than £18 value).

No UK Import VAT is chargeable on goods imported into the UK if the delivery is under £18 in value, and Guernsey (being outside the EC) has no VAT regime.

However, though it is not part of the EC (so VAT is not the proper term), on 1 May 2008 Jersey did introduce a 3% VAT-like charge on certain transactions. So do keep an eye on what Guernsey does in future: though I know of no plans to change things, all jurisdictions are struggling to maintain their revenues and will be looking to replenish state coffers in 2011.

But frankly, you'd have to turnover a large amount of goods at under £18 per delivery to breach the £300k GST registration threshold even if the regime is extended from Jersey; and even then I doubt it would have much affect on your business. But a good adviser will know all this and can only advise properly once they have all the details of your transactions (annual turnover, nature of purchases, sales, etc).

To be clear: I would not currently expect VAT/GST to be suffered on any transaction, if the facts are as I believe them to be. But we cannot be authoritative until the paperwork is examined to verify the details.

Hope it helps?

 

[OffshoreSystems]

GST doesnt effect you as an import/exporter. If you were to import/export from Jersey you would be registered as an importer/exporter so your GST would be defferred as you would be exporting these items back out of Jersey. The only GST you would end up paying would be for anything that is sold to a Jersey customer and thats not really going to be much if anything!

 

[Kevin Hall]

GST doesnt effect you as an import/exporter. If you were to import/export from Jersey you would be registered as an importer/exporter so your GST would be defferred as you would be exporting these items back out of Jersey. The only GST you would end up paying would be for anything that is sold to a Jersey customer and thats not really going to be much if anything!

Hi

I was more thinking that there might be relevant advice if the trader bought in any services, either in terms of Jersey-GST on Jersey-sourced services, or even Reverse Charge on non-Jersey-sourced services.

But I didn't want to confuse matters, as (i) the trader is in Guernsey and (ii) the level of services purchased is unlikely to be high (office, local accountant/adviser, etc.); so I doubt it will be relevant for this trader. But it might be relevant for the future reference of anyone else looking at this thread ...