UK budget is 'beginning of end' for fulfilment industry

George Osborne announced plans to limit the low value consignment relief

The director of a Jersey health care company said the UK budget signalled the beginning of the end for the fulfilment industry.

Phil Balderson from Healthspark made the comments after UK Chancellor George Osborne's budget announcement.

The fulfilment industry allows companies in the island to sell VAT-free products to customers in the UK where VAT would normally apply.

Firms will now have to pay VAT to export items of £15 or more to the UK.

'Good and bad'

The present maximum limit of Low Value Consignment Relief (LVCR) is £18.

Mr Balderson said: "It's good and bad, the guillotine's been hoisted and it will fall."

Jersey's Economic Development Minister Senator Maclean said: "The UK media have incorrectly stated that the Channel Island's online retail sector is in some way responsible for the demise of UK high street shops.

"In fact online sales of products like DVDs and CDs only account for a small proportion of the overall UK market, with the vast proportion sold through UK supermarkets and other UK retail outlets.

"The UK Treasury's review of LVCR will give Jersey the opportunity to counter unfounded criticism of our online retail industry.

"The [Economic Development Department] has worked closely with the sector and the UK Treasury to eliminate abuse of LVCR."

UK Chancellor George Osborne also said that he would work with the European Commission to stop the relief being exploited from the Channel Islands and other places.

In the budget document, he said: "The government will explore options with the European Commission to limit the scope of the relief so that it can no longer be exploited for a purpose it was not intended for.

"The government will also revisit the level of the LVCR in Budget 2012, if discussions with the European Commission do not produce a workable solution to the problem of exploitation of the relief."

Senator Maclean said that more than 1,000 people are employed in the fulfilment industry across the Channel Islands.

He said: "I am determined to minimise the impact of the UK Government's announcement and ensure that legitimate Jersey businesses can continue to trade profitably."

Earlier this month, a debate in the House of Lords gained cross-party support to close the VAT loophole.

It was announced at the time that it costs the UK government £130m each year in lost tax.

The peer behind the motion, Lord Ralph Lucas, branded the industry a "smuggling enterprise".