Taxation: Low-value Consignment Relief

Lord Newby Excerpts

Tuesday 1st March 2011 Lords Chamber

[Lord Sassoon]

My Lords, I have to say that, until a few days ago, I was equally in the dark. I shall try to keep it within the seven minutes.

There is a scheme in European law to make sure that small-value goods imported from outside the European Union can be exempted from value added tax, because it would be disproportionate and a huge cost to consumers and businesses if every small parcel bought from outside the EU had to be scrutinised by the Royal Mail and VAT collected. So there is an exemption under European law for individual consignments up to the value of €22 or £20. At the moment the UK has a limit of £18, below which VAT on imports is not collected. I hope that that explains it.

[Lord Newby]

My Lords, will the Minister accept that while at one level it sounds a rather frivolous subject, we are talking about more than 90 per cent of all CD sales in the UK? It has had a damaging impact on retailers and is another example of the Channel Islands being able to benefit from a tax scam. Will he take back to his colleagues in the Treasury the view of many Members of your Lordships’ House that this is a classic area where a small change in practice by HMRC can yield very many benefits which not only are good in principle but can also be beneficial to the Treasury?

[Lord Sassoon]

My Lords, I fully accept my noble friend’s statement that this is an important area, which is why the Treasury is looking at it. It flows not from any scam but from the fact that the Channel Islands are treated as outside the European Union for these purposes. That goes back to the accession treaty. The previous Government took steps with the Channel Islands authorities to encourage them to introduce a voluntary restraint and caps on the activities of individual firms in this area. The issue relates not only to CDs and DVDs but to a whole range of goods. It is precisely because this is an important area and we want to make sure that the Exchequer is protected that Ministers are looking at what else we might do.