ends retail business in face of LVCR changes

Online retailer is closing its retail business in the wake of the government's closure of the offshore loophole that saw millions of pounds of goods - mostly CDs and DVDs - sent VAT-free to the UK from the Channel Islands.

Some 147 jobs are now set to be axed in Jersey, while a further 67 employees at the Cambridge and Bristol offices will be made redundant.The company says the website will still operate an online marketplace, where a number of retailers can offer products for sale.

The writing was always on the wall for operators like after a legal challenge mounted in March 2012 at the High Court by the Channel Island governments of Guernsey and Jersey failed in its bid to overturn the Chancellor's plans to abolish Low Value Consignment Relief (LVCR).

It followed George Osborne's announcement in November 2011 that from 1 April 2012, LVCR would no longer apply to goods sent to the UK from the Channel Islands. As a preliminary measure the LVCR threshold was reduced from £18 to £15.

The 30-year-old administrative relief for perishable goods sent by post had - over the past decade - been exploited by large companies who moved their operations off-shore in order to exploit it, undercutting smaller UK-based retailers who were unable to compete on price.

Scores of UK-based retailers had repeatedly lobbied the Treasury to close the loophole that made them unable to compete with VAT-free prices online.

Under the scheme, a wide range of sub £15 products purchased and imported from outside the EU qualified as VAT-exempt under LVCR. Multiple goods orders were frequently broken down to individual packages in order to exploit it.

Companies essentially 'circular-shipped' their products from the UK to the Channel Islands and back again in order to qualify for the was bought by Japanese company, Rakuten for £25m in September 2011.

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