There is now just a week left until the legal loophole which allows retailers based in the Channel Islands to send goods to the UK without paying VAT ends.
Last week the High Court dismissed a challenge by the governments of Jersey and Guernsey to stop the UK from charging VAT on imported goods worth less than £15. From April 1, items such as books, CDs and DVDs which often fall into this bracket will attract a 20 per cent VAT charge, and industry commentators have said this could well lead these online retailers to increase the price of their goods as a result.
Are you ready to stockpile?
The court’s ruling will mean that small and medium-sized companies will be able to compete on a level playing field with the sector’s major players, but with so many people already going online to purchase these types of goods, will the closure of the tax loophole change consumers’ buying behaviour?
Will you be stocking up on DVDs over the next few days just in case the likes of Amazon and Play.com decide to slap 20 per cent on their prices to cover VAT?
Chris Webster, vice-president, head of retail at research firm Capgemini, wrote in Retail Gazette that he doesn’t expect that to be the case, and that companies will continue to offer customers deals and special offers.
He said: “Even if you can’t reduce prices by a fifth across the board, most businesses ought to be able to offer loyal customers tailored offers.”
Mr Webster advised affected firms to make the most of the rule change.
“UK brands based out in the channel built strong business on the ability to ship products using the tax loophole,
“Now they must compete with multichannel and the advantage of passing trade. Despite this they have a real opportunity to use their leadership position and knowledge of the market to adapt under the ruling.”
Do you think it is right that the British government is going to charge VAT on these imported products?