Do Amazon use the Channel Islands loop hole trick for small items? I don't fully understand it, but I did hear that the government were looking to close the loophole, which could affect companies based their selling items into the mainland.
It's not a trick or a loophole, it's called Low Value Consignment Relief (LVCR) it is law until 1 April 2012 as the UK have decided that the reason why UK retail is doing so bad is because of Channel Islands....... well of course it's our fault!
The funny thing is that people moan away about Guernsey and Jersey's VAT position (government and others who don't have a clue) and demand law changes, which have now been made, and ultimately it's the UK shoppers who suffer as they now have to pay VAT on sub £15 items.
Of course Swizerland and other countries can continue to supply goods free of VAT.
Thing that does my nut in with all this is that this law existed so that local growers could be competitive in the UK with things like tomatoes, flowers etc. Scrapping LVCR will kill our only alternative industry to finance. So big thanks to all the greedy UK companies that came in, sucked us dry, drew attention to HMRC that they're missing out on VAT revenue and stuffed off when HMRC put their foot down.
Also, it was the UK government themselves that didn’t want to be troubled with the collection of small amounts of VAT which is why this law has remained since early 1980’s.
To answer the OP's question, you don't pay VAT on anything under £15 at present if from say Amazon Jersey, Play.com Jersey or HMV, 7 Day Shop, Moonpig (based in Guernsey). You do and always have paid VAT on anything above that figure - the retailers pay the VAT amount to HMRC as any other company does.
Thing that makes me laugh about all this is the HMRC reckons it will generate £120m per year in the next 5 years. If you do the sums it's £3 at the most they are missing out from £15 LVCR relief – that works out at additional VAT revenue on 40,000,000 items under £15!!! I seriously doubt this is remotely close to the real figures.
One last moan - we get royally ripped off living in Channel Islands for basically everything, when we ask UK companies to deduct VAT from goods we buy more often than not they say they aren't able to and can pocket the 20%..... nice! And then stick a stupid shipping charge on top as well
